Document:

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                                                                  Exhibit 4.7
                                                                  -----------

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.

                     PACIFIC AEROSPACE & ELECTRONICS, INC.

                                VESTING WARRANT
                                ---------------

Warrant No. V W 2  Dated: July 27, 2000

     Pacific Aerospace & Electronics, Inc., a Washington corporation (the
"Company"), hereby certifies that, for value received, Bay Harbor Investments,
Inc., or its registered assigns ("Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company the total number of shares of
common stock, $.001 par value per share (the "Common Stock"), of the Company
(each such share, a "Warrant Share" and all such shares, the "Warrant Shares")
calculated pursuant to Section 3 of this Warrant (subject to adjustment for
certain events as set forth herein) at an exercise price equal to $.001 per
share ( "Exercise Price"), upon the occurrence of any of the events set forth in
Section 3 through and including the 5th Business Day after the expiration of the
Adjustable Warrant (the "Expiration Date"), and subject to the following terms
and conditions (certain terms used herein are defined in Exhibit A attached
                                                         ---------
hereto).  The Expiration Date, however, at the Holder"s option, shall be
extended by any number of days after the Effectiveness Date (as defined in the
Registration Rights Agreement) during which the registration statement is not
effective or during which any prospectus included in the Underlying Shares
Registration Statement may not be used by the holders thereof for the resale of
Underlying Shares (as defined in the Purchase Agreement).

     1.  Registration of Warrant.  The Company shall register this Warrant, upon
         -----------------------
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.

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     2.  Registration of Transfers.  The Company shall register the transfer of
         -------------------------
any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed
to the Company at the address specified in Section 12.  Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder.

     3.  Duration, Vesting and Exercise.
         ------------------------------

     Upon the occurrence of any of the events listed in Section 3(a)(i)-(vii)
below (each, an "Event"), a number of Warrant Shares equal to the product of 30%
of $3,500,000 divided by the Per Share Market Values of the Company"s Common
Stock on the Trading day preceding the date of such Event, shall vest and become
exercisable.

          (a)  (i)  upon the occurrence of any of (i) an acquisition after the
date hereof by an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of in excess of 1/3 of the voting securities of the
Company, (ii) a replacement of more than one-half of the members of the
Company's board of directors which is not approved by those individuals who are
members of the board of directors on the date hereof in one or a series of
related transactions, (iii) the merger of the Company with or into another
entity, consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions, unless following such
transaction or series of transactions, the holders of the Company's securities
prior to the first such transaction continue to hold at least 2/3 of the
securities of the surviving entity or acquirer of such assets or (iv) the
execution by the Company of an agreement to which the Company is a party or by
which it is bound, providing for any of the events set forth above in (i), (ii)
or (iii);

               (ii) five (5) Business Days prior to the proposed consummation
with respect to the Company of a "Rule 13e-3 transaction" as defined in Rule 13e
3 under the Exchange Act (or, if necessary, such earlier date as the Company
shall determine in good faith to be required in order for the Holder to be able
to participate in such transaction), it being agreed that the Holder will
receive actual notice of the 13e-3 Statement filed with the Commission;

               (iii) The Common Stock fails to be listed or quoted for trading
on the Nasdaq or a Subsequent Market for a period of ten consecutive Trading
Days;

               (iv) Subject to Section 2(d) of the Registration Rights
Agreement, after the Effective Date, a holder of Registrable Securities (as
defined in the Registration Rights Agreement) is not permitted to sell
Registrable Securities under the Underlying Shares Registration Statement (as
defined in Exhibit A) for any reason for ten or more consecutive Trading Days;
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               (v) The Underlying Shares Registration Statement shall not be
declared effective by the Commission on or prior to the 180th day following the
Closing Date; or

               (vi) The Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after a Date of Exercise
pursuant to and in accordance with Section 4(a);

               (vii) The Company shall fail or default in the timely performance
of any material obligation under the Transaction Documents and such failure or
default shall continue uncured for a period of ten (10) Business Days after the
date on which notice of such failure or default is first given to the Company
(it being understood that no prior notice need be provided in the case of
defaults which cannot reasonably be cured within a 10-day period).

          (b) On any Event Date (as defined in the Registration Rights
Agreement) under Section 2(c) of the Registration Rights Agreement and every
monthly anniversary of such Event Date until the relevant Event (as defined in
the Registration Rights Agreement) is cured, this Warrant shall vest and become
exercisable with respect to a number of Warrant Shares equal to the product of
3% of $3,500,000 divided by the Per Share Market Values of the Company's Common
Stock on the day preceding such Event Date or on the date preceding the monthly
anniversary of such Event Date, as applicable and such vesting shall occur for
each event occurring under such Section.

     The date on which any of the events described in Section 3(a) or 3(b)
occurs shall be referred to herein as a "Vesting Date."

          (c) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable by the registered Holder on any Business Day before 6:30 P.M., New
York City time, at any time and from time to time on or after the date hereof to
and including the Expiration Date.  At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value.

          (d) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable, either in its entirety or, from time to time, for a portion of the
number of Warrant Shares as reflected on the Warrant Shares Exercise Log.

     4.  Delivery of Warrant Shares.
         --------------------------

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          (a) Upon delivery of the Form of Election to Purchase to the Company
(with the attached Warrant Shares Exercise Log) at its address for notice set
forth in Section 12  and upon payment of the Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase hereunder, the
Company shall promptly (but in no event later than three Business Days after the
Date of Exercise (as defined herein)) issue and deliver to the Holder, a
certificate for the Warrant Shares issuable upon such exercise, free of
restrictive legends except (i) either in the event that a registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder is not then effective or the Warrant Shares are not
freely transferable without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii) if this Warrant shall have been issued pursuant to a written agreement
between the original Holder and the Company, as required by such agreement. Any
person so designated by the Holder to receive Warrant Shares shall be deemed to
have become holder of record of such Warrant Shares as of the Date of Exercise
of this Warrant. The Company shall, upon request of the Holder, if available,
use its best efforts to deliver Warrant Shares hereunder electronically through
the Depository Trust Corporation or another established clearing corporation
performing similar functions, provided, that, the Company may, but will not be
                              --------
required to change its transfer agent if its current transfer agent cannot
deliver Warrant Shares electronically through the Depository Trust Corporation.

          (b) If the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section 4(a) by the
fifth (5th) Trading Day after the Date of Exercise, then the Holder will have
the right to rescind such exercise.

          (c) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder certificate or certificates representing
the Warrant Shares pursuant to Section 4(a) by the fifth (5th) Trading Day after
the Date of Exercise, and if after such fifth (5th) Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the
Holder anticipated receiving upon such exercise (a "Buy-In"), then the Company
shall, to the extent such a payment is not then prohibited or restricted under
the Indenture, pay (1) in cash to the Holder the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required to
deliver pursuant to Section 4(b) to deliver to the Holder in connection with the
exercise at issue by (B) the Per Share Market Value at the time of the
obligation giving rise to such purchase obligation and (2) deliver to the Holder
the number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations under Section 4(b).
For example, if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with a market price on the date of exercise totaled $10,000, under
clause (A) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.

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          (d) The Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares.  If the
Company breaches its obligations under this Warrant, then, in addition to any
other liabilities the Company may have hereunder and under applicable law, the
Company shall pay or reimburse the Holder on demand for all costs of collection
and enforcement (including reasonable attorneys fees and expenses).

     5.  Payment of Taxes.  The Company will pay all documentary stamp taxes
         ----------------
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder.  The Holder shall be responsible for all other tax liability that
may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.

     6.  Replacement of Warrant.  If this Warrant is mutilated, lost, stolen or
         ----------------------
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested.  Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.

     7.  Reservation of Warrant Shares.  The Company covenants that it will at
         -----------------------------
all times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 8).  The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.

     8.  Certain Adjustments.  The  number of Warrant Shares vesting on  any
         -------------------
Vesting Date and issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section.

                                      -5-
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               (i) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Adjustment Period Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision or combination, and shall apply to successive
subdivisions and combinations.

               (ii) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of Warrant Shares such Holder would
have been entitled to had such Holder exercised this Warrant immediately prior
to such reclassification or share exchange. The terms of any such
reclassification or share exchange shall include such terms so as to continue to
give to the Holder the right to receive the securities or property set forth in
this Section 8(b) upon any exercise following any such reclassification or share
exchange.

               (iii) In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to (A) exercise this
Warrant for the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and the Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the Common Stock for which this Warrant could have been exercised
immediately prior to such merger, consolidation or sales would have been
entitled or (B) in the case of a merger or consolidation, (x) require the
surviving entity to issue common stock purchase warrants equal to the number
Warrant Shares to which this Warrant then permits, which newly warrant shall be
identical to this Warrant, and (y) simultaneously with the issuance of such
warrant, the holder of such new warrant shall have the right to exercise such
warrant only into shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger or consolidation. In the case of clause (B), the exercise price for such
new warrant shall be based upon the amount of securities, cash and property that
each share of Common Stock would receive in such transaction and the Exercise
Price of this Warrant immediately prior to the effectiveness or closing date for
such transaction. The terms of any such

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merger, sale or consolidation shall include such terms so as continue to give
the Holder the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.

               (iv) For the purposes of this Section 8, the following clauses
shall also be applicable:

          (i)  Record Date.  In case the Company shall take a record of the
               -----------
holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.

          (ii)  Treasury Shares.  The number of shares of Common Stock
                ---------------
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
     (v) All calculations under this Section 8 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be.

     (vi) If  (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; (ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; (iii) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (iv) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or (v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall cause to be mailed to each Holder at their last addresses as they
shall appear upon the Warrant Register, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, that the failure to mail such notice or any defect
               --------
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.

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     9.  Payment of Exercise Price.  The Holder shall pay the Exercise Price in
         -------------------------
one of the following manners:

          (a) Cash Exercise.  The Holder may deliver immediately available
              -------------
funds; or

          (b) Cashless Exercise.  The Holder may surrender this Warrant to the
              -----------------
Company together with a notice of cashless exercise, in which event the Company
shall issue to the Holder the number of Warrant Shares determined as follows:

                    X = Y [(A-B)/A]
     where:
                    X = the number of Warrant Shares to be issued to the
Holder.

                    Y = the number of Warrant Shares with respect to which this
                    Warrant is being exercised.

                    A = the average of the closing sale prices of the Common
                    Stock for the five (5) trading days immediately prior to
                    (but not including) the Date of Exercise as reported by
                    Bloomberg Information Systems, Inc. (or any successor to its
                    function of reporting stock prices).

                    B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged, subject to changes in applicable regulations or
Commission (as defined in Exhibit A) interpretations thereof,  that the Warrant
Shares issued in a cashless exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares shall be
deemed to have been commenced, on the issue date.

     10.  Certain Exercise Restrictions.
          -----------------------------

          (a) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder) in excess of 9.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such exercise
and held by such Holder after application of this Section.  Since the Holder
will not be obligated to report to the Company the number of shares of Common
Stock it may hold at the time of an exercise  hereunder, unless the exercise at
issue would result in the issuance of shares of Common Stock in excess of 9.999%
of the then outstanding shares of Common Stock without regard to any other
shares which may be beneficially owned by the Holder or an affiliate thereof,
the Holder shall have the authority and obligation to determine whether the
restriction contained in this Section

                                      -8-

<PAGE>

will limit any particular exercise hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that, without regard to
any other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the exercise for the
maximum portion of this Warrant permitted to be exercised on such Date of
Exercise in accordance with the periods described herein and, at the option of
the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to the Holder. The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.

          (b) If the Company Stock is then listed for trading on the Nasdaq or
the Nasdaq SmallCap Market and the Company has not obtained the Shareholder
Approval (as defined below), then the Company may not, upon exercise of this
Warrant, issue in excess of the product of (i) 6,621,712 Warrant Shares (which
equals 19.999% of the number of shares of Common Stock outstanding on the
Closing Date) or such lesser number of Warrant Shares as the Company and the
Holder may agree is required pursuant to an interpretation by Nasdaq of its
applicable rules and (ii) the quotient obtained by dividing (x) the number of
shares of Common Stock issued and sold to the original Holder on the Closing
Date by (y) the number of shares of Common Stock issued and sold by the Company
on the Closing Date (such number of shares, the "Issuable Maximum").  If any
Holder shall no longer hold Warrants then such Holder's remaining portion of the
Issuable Maximum shall be allocated pro-rata among the remaining Holders.  If on
any Date of Exercise (A) the Company Stock is listed for trading on the Nasdaq
or the Nasdaq SmallCap Market, (B)  the Exercise Price then in effect is such
that the aggregate number of shares of Common Stock that would then be issuable
upon exercise in full of this Warrant, together with any shares of Common Stock
previously issued upon exercise of this Warrant, would equal or exceed the
Issuable Maximum, and (C) the Company shall not have previously obtained the
vote of shareholders, if any, as may be required by the applicable rules and
regulations of the Nasdaq Stock Market to approve the issuance of shares of
Common Stock in excess of the Issuable Maximum pursuant to the terms hereof (the
"Shareholder Approval"), then the Company shall issue to the Holder a number of
shares of Common Stock equal to the Issuable Maximum and, with respect to the
shares whose issuance would result in an issuance of shares of Common Stock in
excess of the Issuable Maximum, (the "Excess Warrant Shares"), the Company shall
have the option to  either (1) use its best efforts to obtain the Shareholder
Approval applicable to such issuance as soon as possible, but in any event no
later than 60 days after such request (such 60th day, the "Target Date") or (2)
pay to the Holder, within ten (10) Trading Days from the request therefor, an
amount in cash equal to the product of (x) the Excess Warrant Shares multiplied
by (y) the closing sales price of the Common Stock on (a) the Target Date or (b)
the Date of Exercise giving rise to the obligation to seek Shareholder Approval,
whichever is greater (the "Cash Payment").  In the event the Company elects to
seek the Shareholder Approval pursuant to clause (1) of the immediately
preceding sentence and the Company does not obtain the Shareholder Approval on
or prior to the Target Date, then, on the

                                      -9-
<PAGE>

Target Date, the Company shall, to the extent such a payment is not then
prohibited or restricted under the Indenture, pay the Cash Payment to the
Holder. If the Company fails to pay the Cash Payment in full pursuant to this
Section within twenty (20) days after the date payable, the Company will, to the
extent such a payment is not then prohibited or restricted under the Indenture,
pay interest on such amount at a rate of 18% per annum, or such lesser maximum
amount that is permitted to be paid by applicable law, to the Holder, accruing
daily from the date payable until such amount, plus all such interest thereon,
is paid in full. The Company and the Holder understand and agree that shares of
Common Stock issued upon exercise of this Warrant and then held by the Holder or
an affiliate thereof may not cast votes or be deemed outstanding for purposes of
any vote to obtain the Shareholder Approval.

     11.  Fractional Shares.  The Company shall not be required to issue or
          -----------------
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented.  If any fraction of
a Warrant Share would, except for the provisions of this Section 12, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.

     12.  Notices.  Any and all notices or other communications or deliveries
          -------
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 P.M. (New York City time) on a Business Day (with
confirmation of transmission), (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 6:30 P.M. (New
York City time) on any date and earlier than 11:59 P.M. (New York City time) on
such date (with confirmation of transmission), (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given.  The addresses for such communications shall be: (i) if to the Company,
to 430 Olds Station Road, Third Floor, Wenatchee, Washington 98801, facsimile:
(509) 667-9696, attention Donald A. Wright, Chief Executive Officer, with a copy
to Sheryl A. Symonds, General Counsel, 110 Main Street, Suite 100, Edmonds, WA
98020, facsimile: (425) 774-0103 (ii) if to the Holder, to the Holder at the
address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.

     13.  Warrant Agent.
          -------------

          (a) The Company shall serve as warrant agent under this Warrant.  Upon
thirty (30) days' notice to the Holder, the Company may appoint a new warrant
agent.

          (b) Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new

                                      -10-
<PAGE>

warrant agent shall be a party or any corporation to which the Company or any
new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder's last address as shown on
the Warrant Register.

     14.  Miscellaneous.
          -------------

          (a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns.  This Warrant may be
amended only in writing signed by the Company and the Holder and their
successors and assigns.

          (b) Subject to Section 14(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant.  This
Warrant shall inure to the sole and exclusive benefit of the Company and the
Holder.

          (c) The corporate laws of the State of Washington shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.  The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper.  The Holders hereby irrevocably waive personal
service of process and consent to process being served in any such suit, action
or proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such Holder at the address in
effect for notices to such Holder under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  The Company consents to being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to JGB Service Corporation, 600
University Street, Suite 3600, Seattle, WA 98101 and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.

          (d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.

          (e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions

                                      -11-
<PAGE>

of this Warrant shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Warrant.

          IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

                    PACIFIC AEROSPACE & ELECTRONICS, INC.

                    By:  /s/ Sheryl A. Symonds
                        ------------------------
                      Name:  Sheryl A. Symonds
                      Title: Vice President Administration and General Counsel

                                      -12-
<PAGE>

                         FORM OF ELECTION TO PURCHASE

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)

To Pacific Aerospace & Electronics, Inc.

     In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase  _____________
shares of common stock ("Common Stock"), $.001 par value per share, of Pacific
Aerospace & Electronics, Inc. and, if such Holder is not utilizing the cashless
exercise provisions set forth in this Warrant, encloses herewith $________ in
cash, certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of shares of
Common Stock to which this Form of Election to Purchase relates, together with
any applicable taxes payable by the undersigned pursuant to the Warrant.

     The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of

                                    PLEASE INSERT SOCIAL SECURITY OR
                                    TAX IDENTIFICATION NUMBER

                                    -------------------------------------------

-------------------------------------------------------------------------------
                        (Please print name and address)

                                      -13-
<PAGE>

                          Warrant Shares Exercise Log
                          ---------------------------

<TABLE>
<CAPTION>
<S>                          <C>                     <C>                           <C>
         Date               Number of Warrant         Number of Warrant Shares     Number of Warrant
                          Shares Available to be             Exercised              Shares Remaining
                                Exercised                                           to be Exercised
-----------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------
</TABLE>

                                      -14-
<PAGE>

                              FORM OF ASSIGNMENT

          [To be completed and signed only upon transfer of Warrant]

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase  ____________ shares of Common Stock of Pacific Aerospace &
Electronics, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Pacific
Aerospace & Electronics, Inc. with full power of substitution in the premises.

Dated:

_______________, ____

                         _______________________________________
                         (Signature must conform in all respects to name of
                         holder as specified on the face of the Warrant)

                         _______________________________________
                         Address of Transferee

                         _______________________________________

                         _______________________________________

In the presence of:

__________________________

                                      -15-
<PAGE>

                                 Exhibit A
                                 ---------

     (i) "Business Day" shall have the meaning set forth in the Purchase
Agreement.

     (ii) "Closing Date" shall have the meaning set forth in the Purchase
Agreement.

     (iii)  "Commission" means the Securities and Exchange Commission.

     (iv) "Effective Date" the date on which the Underlying Shares Registration
Statement is first declared effective by the Commission.

     (v) "Indenture" means the Indenture dated as of July 30,1998, among the
Company and Balo Precision Parts, Inc., Cashmere Manufacturing Co. Inc., Ceramic
Devices, Inc., Electronic Specialty Corporation, Morel Industries, Inc.
Northwest Technical Industries, Inc., Pacific Coast Technologies, Inc., PA&E
International, Inc. and Seismic Safety Products, Inc.

     (vi) "Nasdaq" means the Nasdaq National Market.

     (vii)  "Per Share Market Value"  means on any particular date (a) the
closing price per share of the Common Stock on such date on the Nasdaq or on any
Subsequent Market on which the Common Stock is then listed or quoted, as
reported by Bloomberg Information Services, Inc. (or any successor entity
succeeding to its function of reporting prices), or if there is no such price on
such date, then the closing price on the Nasdaq or on such Subsequent Market on
the date nearest preceding such date, as reported by Bloomberg Information
Services, Inc. (or any successor entity succeeding to its function of reporting
prices), or (b) if the Common Stock is not then listed or quoted on the Nasdaq
or a Subsequent Market, the closing price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Holder, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an Appraiser selected in good faith by the Holders of a majority
of the applicable Warrant Shares.

     (viii)  "Purchase Agreement" means the Securities Purchase Agreement, dated
the date hereof to which the Company and the original Holder are parties and
pursuant to which this Warrant was issued.

     (ix) "Purchase Price" means $1.75 (which number shall be subject to
equitable adjustment for stock splits, recombinations and similar events).

     (x) "Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof to which the Company and the original Holder
are parties.

     (xi) "Subsequent Market" shall mean any of the New York Stock Exchange,
American Stock Exchange, or Nasdaq SmallCap Market.

     (xii)  "Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock is not listed on the
Nasdaq or a Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board , or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a

                                      -16-
<PAGE>

day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
                                                                      --------
that in the event that the Common Stock is not listed or quoted as set forth in
(a), (b) and (c) hereof, then Trading Day shall mean a Business Day.

     (xiii)  "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.

     (xiv)  "Underlying Shares Registration Statement" shall have the meaning
ascribed to it in the Purchase Agreement.

                                     -17-CENTENNIAL TECHNOLOGIES, INC.

                            2000 STOCK INCENTIVE PLAN

1.       PURPOSE

         The  purpose  of  this  2000  Stock  Incentive  Plan  (the  "Plan")  of
Centennial  Technologies,  Inc., a Delaware  corporation (the "Company"),  is to
advance the interests of the Company's  stockholders  by enhancing the Company's
ability to attract,  retain and  motivate  persons who make (or are  expected to
make)  important  contributions  to the Company by  providing  such persons with
equity  ownership  opportunities  and  performance-based  incentives and thereby
better  aligning  the  interests  of such  persons  with those of the  Company's
stockholders.  Except where the context otherwise  requires,  the term "Company"
shall include any of the Company's present or future subsidiary  corporations as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended,  and
any regulations promulgated thereunder (the "Code").

2.       ELIGIBILITY

         All of the Company's employees,  officers,  directors,  consultants and
advisors (and any  individuals  who have accepted an offer for  employment)  are
eligible to be granted options,  restricted stock awards,  or other  stock-based
awards (each,  an "Award")  under the Plan.  Each person who has been granted an
Award under the Plan shall be deemed a "Participant".

3.       ADMINISTRATION, DELEGATION

(a)  ADMINISTRATION BY BOARD OF DIRECTORS.  The Plan will be administered by the
Board of Directors of the Company (the "Board").  The Board shall have authority
to grant  Awards  and to adopt,  amend and  repeal  such  administrative  rules,
guidelines and practices  relating to the Plan as it shall deem  advisable.  The
Board may correct any defect, supply any omission or reconcile any inconsistency
in the Plan or any Award in the manner and to the extent it shall deem expedient
to carry the Plan into  effect and it shall be the sole and final  judge of such
expediency.  All  decisions  by the  Board  shall  be made in the  Board's  sole
discretion  and shall be final and binding on all persons having or claiming any
interest in the Plan or in any Award.  No director or person acting  pursuant to
the  authority  delegated  by the  Board  shall  be  liable  for any  action  or
determination relating to or under the Plan made in good faith.

(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by applicable law,
the Board or any  Committee  (as defined in Section 3(c)) may delegate to one or
more executive officers of the Company the power to make Awards to new employees
of the Company,  excluding  directors and  officers,  and to exercise such other
powers under the Plan as the Board may determine,  provided that the Board shall
fix the maximum  number of shares  subject to Awards and the  maximum  number of
shares for any one Participant to be made by such executive officers.

                                       1
<PAGE>

(c)  APPOINTMENT OF COMMITTEES.  To the extent  permitted by applicable law, the
Board shall appoint a committee or  subcommittee of the Board (a "Committee") of
not less than two members,  each member of which shall be an "outside  director"
within the meaning of Section 162(m) of the Code and a  "non-employee  director"
as defined in Rule 16b-3 promulgated  under the Securities  Exchange Act of 1934
(the "Exchange  Act").  All references in the Plan to the "Board" shall mean the
Board or a  Committee  of the  Board or the  executive  officer  referred  to in
Section 3(b) to the extent that the Board's  powers or authority  under the Plan
have been delegated to such Committee or executive officer.

4.       STOCK AVAILABLE FOR AWARDS

(a) NUMBER OF SHARES.  Subject to adjustment under Section 8, Awards may be made
under the Plan for up to 1,000,000  shares of common  stock,  $.01 par value per
share,  of the  Company  (the  "Common  Stock").  If  any  Award  expires  or is
terminated,  surrendered or canceled  without having been fully  exercised or is
forfeited in whole or in part or results in any Common  Stock not being  issued,
the unused  Common Stock  covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as  hereinafter  defined),  to any limitation  required under the Code.
Shares issued under the Plan may consist in whole or in part of  authorized  but
unissued shares or treasury shares.

(b)  PER-PARTICIPANT  LIMIT.  Subject to adjustment under Section 8, the maximum
number of shares of Common  Stock with respect to which Awards may be granted to
any  Participant  under  the Plan  shall  be  500,000  per  calendar  year.  The
per-Participant  limit  described in this  Section  4(b) shall be construed  and
applied consistently with Section 162(m) of the Code ("Section 162(m)").

5.       STOCK OPTIONS

(a) GENERAL.  The Board may grant  options to purchase  Common  Stock (each,  an
"Option")  and  determine  the number of shares of Common Stock to be covered by
each  Option,  the  exercise  price  of  each  Option  and  the  conditions  and
limitations  applicable  to the  exercise of each Option,  including  conditions
relating  to  applicable  federal  or state  securities  laws,  as it  considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as  hereinafter  defined)  shall be  designated  a  "Nonstatutory  Stock
Option".

(b)  INCENTIVE  STOCK  OPTIONS.  An  Option  that  the  Board  intends  to be an
"incentive  stock  option" as defined in Section 422 of the Code (an  "Incentive
Stock  Option")  shall only be granted to  employees of the Company and shall be
subject to and shall be construed  consistently with the requirements of Section
422 of the Code.  The Company shall have no liability to a  Participant,  or any
other  party,  if an Option (or any part  thereof)  which is  intended  to be an
Incentive Stock Option is not an Incentive Stock Option.

                                       2
<PAGE>

(c) EXERCISE  PRICE.  The Board shall  establish the exercise  price at the time
each  Option is granted  and  specify  it in the  applicable  option  agreement;
provided,  however,  that the exercise  price shall be not less than 100% of the
fair market value of the Common Stock,  as determined by the Board,  at the time
the Option is granted.

(d)  DURATION OF OPTIONS.  Each Option  shall be  exercisable  at such times and
subject to such terms and  conditions as the Board may specify in the applicable
option agreement;  provided,  however, that no Option will be granted for a term
in excess of 10 years.

(e) EXERCISE OF OPTION. Options may be exercised by delivery to the Company of a
written  notice of exercise  signed by the proper person or by any other form of
notice (including electronic notice) approved by the Board together with payment
in full as  specified  in  Section  5(f) for the  number of shares for which the
Option is exercised.

(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an Option
granted under the Plan shall be paid for as follows:

         (1) in cash or by check, payable to the order of the Company;

         (2) except as the Board may, in its sole discretion,  otherwise provide
in an option  agreement,  by (i) delivery of an  irrevocable  and  unconditional
undertaking  by a  creditworthy  broker  to  deliver  promptly  to  the  Company
sufficient  funds to pay the exercise price or (ii) delivery by the  Participant
to the Company of a copy of  irrevocable  and  unconditional  instructions  to a
creditworthy  broker  to  deliver  promptly  to  the  Company  cash  or a  check
sufficient to pay the exercise price;

         (3) by  delivery  of shares of Common  Stock  owned by the  Participant
valued at their fair market value as determined by (or in a manner  approved by)
the Board in good faith  ("Fair  Market  Value"),  provided  (i) such  method of
payment is then  permitted  under  applicable law and (ii) such Common Stock was
owned by the Participant at least six months prior to such delivery;

         (4) to the extent  permitted by the Board,  in its sole  discretion and
consistent  with  applicable  law, by (i) delivery of a  promissory  note of the
Participant to the Company on terms  determined by the Board, or (ii) payment of
such other lawful consideration as the Board may determine; or

         (5) by any combination of the above permitted forms of payment.

                                       3
<PAGE>

6.       RESTRICTED STOCK

(a) GRANTS. The Board may grant Awards entitling recipients to acquire shares of
Common Stock,  subject to the right of the Company to repurchase  all or part of
such shares at their issue price or other stated or formula price (or to require
forfeiture  of such shares if issued at no cost) from the recipient in the event
that conditions specified by the Board in the applicable Award are not satisfied
prior to the end of the applicable  restriction period or periods established by
the Board for such Award (each, a "Restricted Stock Award").

(b) TERMS AND CONDITIONS.  The Board shall determine the terms and conditions of
any such  Restricted  Stock Award,  including the  conditions for repurchase (or
forfeiture)  and the  issue  price,  if any.  Any stock  certificates  issued in
respect of a  Restricted  Stock  Award  shall be  registered  in the name of the
Participant  and,  unless  otherwise  determined by the Board,  deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its  designee).  At the expiration of the applicable  restriction  periods,  the
Company (or such designee)  shall deliver the  certificates no longer subject to
such  restrictions  to the  Participant or if the  Participant  has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive  amounts due or exercise  rights of the  Participant in the event of the
Participant's  death  (the  "Designated  Beneficiary").  In  the  absence  of an
effective  designation by a Participant,  Designated  Beneficiary shall mean the
Participant's estate.

7.       OTHER STOCK-BASED AWARDS

         The Board  shall have the right to grant  other  Awards  based upon the
Common  Stock  having  such  terms and  conditions  as the Board may  determine,
including  the grant of  shares  based  upon  certain  conditions,  the grant of
securities  convertible  into Common  Stock and the grant of stock  appreciation
rights.

8.       ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS

(a) CHANGES IN  CAPITALIZATION.  In the event of any stock split,  reverse stock
split, stock dividend, recapitalization, combination of shares, reclassification
of shares,  spin-off or other similar change in  capitalization or event, or any
distribution  to holders of Common Stock other than a normal cash dividend,  (i)
the  number  and  class  of  securities  available  under  this  Plan,  (ii) the
per-Participant  limit set forth in Section 4(b),  (iii) the number and class of
securities and exercise price per share subject to each outstanding Option, (iv)
the  repurchase  price per share subject to each  outstanding  Restricted  Stock
Award, and (v) the terms of each other  outstanding Award shall be appropriately
adjusted by the Company (or  substituted  Awards may be made, if  applicable) to
the extent the Board shall determine, in good faith, that such an adjustment (or
substitution)  is necessary  and  appropriate.  If this Section 8(a) applies and
Section 8(c) also applies to any event, Section 8(c) shall be applicable to such
event, and this Section 8(a) shall not be applicable.

(b)  LIQUIDATION  OR  DISSOLUTION.  In the event of a  proposed  liquidation  or
dissolution  of  the  Company,  the  Board  shall  upon  written  notice  to the
Participants   provide  that  all  then  unexercised  Options  will  (i)  become
exercisable  in full as of a specified  time at least 10 business  days prior to
the  effective  date of such  liquidation  or  dissolution  and  (ii)  terminate

                                       4
<PAGE>

effective upon such  liquidation or dissolution,  except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted  Stock Award or other Award granted under the Plan
at the time of the grant of such Award.

(c)               ACQUISITION EVENTS

(1)  DEFINITION.   An  "Acquisition   Event"  shall  mean:  (a)  any  merger  or
consolidation  of the Company with or into  another  entity as a result of which
the Common Stock is converted  into or exchanged  for the right to receive cash,
securities  or other  property or (b) any  exchange of shares of the Company for
cash,  securities  or other  property  pursuant  to a statutory  share  exchange
transaction.

(2) CONSEQUENCES OF AN ACQUISITION  EVENT ON OPTIONS.  Upon the occurrence of an
Acquisition Event, or the execution by the Company of any agreement with respect
to an Acquisition  Event,  the Board shall provide that all outstanding  Options
shall be assumed,  or equivalent options shall be substituted,  by the acquiring
or succeeding  corporation (or an affiliate  thereof).  For purposes hereof,  an
Option  shall be  considered  to be assumed if,  following  consummation  of the
Acquisition  Event, the Option confers the right to purchase,  for each share of
Common Stock subject to the Option  immediately prior to the consummation of the
Acquisition  Event,  the  consideration   (whether  cash,  securities  or  other
property)  received  as a result of the  Acquisition  Event by holders of Common
Stock for each share of Common Stock held immediately  prior to the consummation
of the Acquisition Event (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
shares of Common Stock);  provided,  however, that if the consideration received
as a result of the Acquisition Event is not solely common stock of the acquiring
or succeeding  corporation (or an affiliate thereof),  the Company may, with the
consent  of  the   acquiring  or   succeeding   corporation,   provide  for  the
consideration  to be received upon the exercise of Options to consist  solely of
common  stock  of the  acquiring  or  succeeding  corporation  (or an  affiliate
thereof) equivalent in fair market value to the per share consideration received
by holders of outstanding  shares of Common Stock as a result of the Acquisition
Event.

(3)  Notwithstanding the foregoing,  if the acquiring or succeeding  corporation
(or an affiliate  thereof)  does not agree to assume,  or  substitute  for, such
Options, then the Board shall, upon written notice to the Participants,  provide
that  all then  unexercised  Options  will  become  exercisable  in full as of a
specified time prior to the  Acquisition  Event and will  terminate  immediately
prior to the  consummation  of such  Acquisition  Event,  except  to the  extent
exercised by the Participants before the consummation of such Acquisition Event;
provided,  however, that in the event of an Acquisition Event under the terms of
which  holders of Common  Stock will receive  upon  consummation  thereof a cash
payment for each share of Common Stock surrendered  pursuant to such Acquisition
Event (the  "Acquisition  Price"),  then the Board may instead  provide that all
outstanding  Options shall terminate upon consummation of such Acquisition Event
and that each Participant shall receive,  in exchange  therefor,  a cash payment
equal to the amount (if any) by which (A) the  Acquisition  Price  multiplied by
the  number of  shares  of Common  Stock  subject  to such  outstanding  Options
(whether or not then  exercisable),  exceeds (B) the aggregate exercise price of
such Options.

                                       5
<PAGE>

(4) CONSEQUENCES OF AN ACQUISITION  EVENT ON RESTRICTED  STOCK AWARDS.  Upon the
occurrence  of an  Acquisition  Event,  the  repurchase  and other rights of the
Company under each outstanding Restricted Stock Award shall inure to the benefit
of the  Company's  successor  and shall apply to the cash,  securities  or other
property  which the Common Stock was converted into or exchanged for pursuant to
such Acquisition Event in the same manner and to the same extent as they applied
to the Common Stock subject to such Restricted Stock Award.

(5)  CONSEQUENCES  OF AN  ACQUISITION  EVENT ON OTHER  AWARDS.  The Board  shall
specify the effect of an Acquisition  Event on any other Award granted under the
Plan at the time of the grant of such Award.

9.       GENERAL PROVISIONS APPLICABLE TO AWARDS

(a)  TRANSFERABILITY OF AWARDS.  EXCEPT AS THE BOARD MAY OTHERWISE  DETERMINE OR
PROVIDE IN AN AWARD, AWARDS SHALL NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE ENCUMBERED BY THE PERSON TO WHOM THEY ARE GRANTED,  EITHER VOLUNTARILY
OR BY OPERATION OF LAW, EXCEPT BY WILL OR THE LAWS OF DESCENT AND  DISTRIBUTION,
AND,  DURING  THE  LIFE OF THE  PARTICIPANT,  SHALL BE  EXERCISABLE  ONLY BY THE
PARTICIPANT. REFERENCES TO A PARTICIPANT, TO THE EXTENT RELEVANT IN THE CONTEXT,
SHALL  INCLUDE  REFERENCES  TO  AUTHORIZED   TRANSFEREES.   NOTWITHSTANDING  THE
FOREGOING, THE BOARD, IN ITS SOLE DISCRETION, MAY PROVIDE IN THE AWARD AGREEMENT
REGARDING A GIVEN STOCK OPTION THAT THE  OPTIONEE MAY TRANSFER HIS  NONSTATUTORY
STOCK OPTIONS TO MEMBERS OF HIS IMMEDIATE  FAMILY,  TO TRUSTS FOR THE BENEFIT OF
SUCH FAMILY  MEMBERS,  OR TO  PARTNERSHIPS  IN WHICH SUCH FAMILY MEMBERS ARE THE
ONLY PARTNERS,  PROVIDED THAT THE TRANSFEREE  AGREES IN WRITING WITH THE COMPANY
TO BE BOUND BY ALL OF THE TERMS AND  CONDITIONS OF THIS PLAN AND THE  APPLICABLE
OPTION.

(b) DOCUMENTATION. EACH AWARD SHALL BE EVIDENCED BY A WRITTEN INSTRUMENT IN SUCH
FORM AS THE BOARD SHALL DETERMINE; SUCH WRITTEN INSTRUMENT MAY BE IN THE FORM OF
AN AGREEMENT  SIGNED BY THE COMPANY AND THE PARTICIPANT OR A WRITTEN  CONFIRMING
MEMORANDUM TO THE PARTICIPANT FROM THE COMPANY. EACH AWARD MAY CONTAIN TERMS AND
CONDITIONS IN ADDITION TO THOSE SET FORTH IN THE PLAN.

(c) BOARD DISCRETION.  EXCEPT AS OTHERWISE  PROVIDED BY THE PLAN, EACH AWARD MAY
BE MADE ALONE OR IN ADDITION OR IN  RELATION  TO ANY OTHER  AWARD.  THE TERMS OF
EACH AWARD  NEED NOT BE  IDENTICAL,  AND THE BOARD  NEED NOT TREAT  PARTICIPANTS
UNIFORMLY.

(d)  TERMINATION OF STATUS.  THE BOARD SHALL DETERMINE THE EFFECT ON AN AWARD OF
THE DISABILITY,  DEATH, RETIREMENT,  AUTHORIZED LEAVE OF ABSENCE OR OTHER CHANGE
IN THE EMPLOYMENT OR OTHER STATUS OF A PARTICIPANT AND THE EXTENT TO WHICH,  AND
THE  PERIOD   DURING   WHICH,   THE   PARTICIPANT,   THE   PARTICIPANT'S   LEGAL
REPRESENTATIVE,  CONSERVATOR,  GUARDIAN OR DESIGNATED  BENEFICIARY  MAY EXERCISE
RIGHTS UNDER THE AWARD.

(e) WITHHOLDING.  EACH PARTICIPANT  SHALL PAY TO THE COMPANY,  OR MAKE PROVISION
SATISFACTORY  TO THE BOARD FOR  PAYMENT  OF,  ANY  TAXES  REQUIRED  BY LAW TO BE
WITHHELD IN CONNECTION WITH AWARDS TO SUCH PARTICIPANT NO LATER THAN THE DATE OF
THE EVENT CREATING THE TAX LIABILITY.  EXCEPT AS THE BOARD MAY OTHERWISE PROVIDE
IN AN  AWARD,  WHEN THE  COMMON  STOCK IS  REGISTERED  UNDER THE  EXCHANGE  ACT,

                                       6
<PAGE>

PARTICIPANTS  MAY, TO THE EXTENT THEN PERMITTED UNDER  APPLICABLE  LAW,  SATISFY
SUCH TAX  OBLIGATIONS IN WHOLE OR IN PART BY DELIVERY OF SHARES OF COMMON STOCK,
INCLUDING SHARES RETAINED FROM THE AWARD CREATING THE TAX OBLIGATION,  VALUED AT
THEIR FAIR MARKET VALUE. THE COMPANY MAY, TO THE EXTENT PERMITTED BY LAW, DEDUCT
ANY SUCH  TAX  OBLIGATIONS  FROM ANY  PAYMENT  OF ANY  KIND  OTHERWISE  DUE TO A
PARTICIPANT.

(f) AMENDMENT OF AWARD. THE BOARD MAY AMEND, MODIFY OR TERMINATE ANY OUTSTANDING
AWARD,  INCLUDING BUT NOT LIMITED TO, SUBSTITUTING THEREFOR ANOTHER AWARD OF THE
SAME OR A DIFFERENT  TYPE,  CHANGING  THE DATE OF EXERCISE OR  REALIZATION,  AND
CONVERTING AN INCENTIVE  STOCK OPTION TO A NONSTATUTORY  STOCK OPTION,  PROVIDED
THAT THE PARTICIPANT'S CONSENT TO SUCH ACTION SHALL BE REQUIRED UNLESS THE BOARD
DETERMINES THAT THE ACTION,  TAKING INTO ACCOUNT ANY RELATED  ACTION,  WOULD NOT
MATERIALLY AND ADVERSELY AFFECT THE PARTICIPANT.

(g)  CONDITIONS  ON DELIVERY  OF STOCK.  THE COMPANY  WILL NOT BE  OBLIGATED  TO
DELIVER  ANY  SHARES  OF  COMMON  STOCK  PURSUANT  TO  THE  PLAN  OR  TO  REMOVE
RESTRICTIONS  FROM  SHARES  PREVIOUSLY  DELIVERED  UNDER THE PLAN  UNTIL (I) ALL
CONDITIONS  OF THE AWARD  HAVE BEEN MET OR REMOVED  TO THE  SATISFACTION  OF THE
COMPANY,  (II) IN THE OPINION OF THE COMPANY'S COUNSEL,  ALL OTHER LEGAL MATTERS
IN CONNECTION WITH THE ISSUANCE AND DELIVERY OF SUCH SHARES HAVE BEEN SATISFIED,
INCLUDING ANY APPLICABLE  SECURITIES  LAWS AND ANY APPLICABLE  STOCK EXCHANGE OR
STOCK MARKET RULES AND  REGULATIONS,  AND (III) THE PARTICIPANT HAS EXECUTED AND
DELIVERED TO THE COMPANY SUCH  REPRESENTATIONS  OR AGREEMENTS AS THE COMPANY MAY
CONSIDER  APPROPRIATE TO SATISFY THE  REQUIREMENTS OF ANY APPLICABLE LAWS, RULES
OR REGULATIONS.

(h)  ACCELERATION.  THE BOARD MAY AT ANY TIME  PROVIDE  THAT ANY  OPTIONS  SHALL
BECOME  IMMEDIATELY  EXERCISABLE IN FULL OR IN PART,  THAT ANY RESTRICTED  STOCK
AWARDS SHALL BE FREE OF RESTRICTIONS IN FULL OR IN PART OR THAT ANY OTHER AWARDS
MAY BECOME EXERCISABLE IN FULL OR IN PART OR FREE OF SOME OR ALL RESTRICTIONS OR
CONDITIONS, OR OTHERWISE REALIZABLE IN FULL OR IN PART, AS THE CASE MAY BE.

10.      MISCELLANEOUS

(a) NO RIGHT TO EMPLOYMENT  OR OTHER  STATUS.  NO PERSON SHALL HAVE ANY CLAIM OR
RIGHT TO BE GRANTED AN AWARD,  AND THE GRANT OF AN AWARD SHALL NOT BE  CONSTRUED
AS  GIVING  A  PARTICIPANT  THE  RIGHT  TO  CONTINUED  EMPLOYMENT  OR ANY  OTHER
RELATIONSHIP WITH THE COMPANY.  THE COMPANY EXPRESSLY  RESERVES THE RIGHT AT ANY
TIME TO DISMISS OR OTHERWISE  TERMINATE ITS RELATIONSHIP WITH A PARTICIPANT FREE
FROM ANY LIABILITY OR CLAIM UNDER THE PLAN, EXCEPT AS EXPRESSLY  PROVIDED IN THE
APPLICABLE AWARD.

(b) NO RIGHTS AS STOCKHOLDER. SUBJECT TO THE PROVISIONS OF THE APPLICABLE AWARD,
NO PARTICIPANT OR DESIGNATED  BENEFICIARY SHALL HAVE ANY RIGHTS AS A STOCKHOLDER
WITH RESPECT TO ANY SHARES OF COMMON STOCK TO BE DISTRIBUTED  WITH RESPECT TO AN
AWARD UNTIL  BECOMING  THE RECORD  HOLDER OF SUCH  SHARES.  NOTWITHSTANDING  THE
FOREGOING, IN THE EVENT THE COMPANY EFFECTS A SPLIT OF THE COMMON STOCK BY MEANS
OF A STOCK  DIVIDEND AND THE EXERCISE  PRICE OF AND THE NUMBER OF SHARES SUBJECT
TO SUCH OPTION ARE ADJUSTED AS OF THE DATE OF THE  DISTRIBUTION  OF THE DIVIDEND
(RATHER  THAN AS OF THE RECORD DATE FOR SUCH  DIVIDEND),  THEN AN  OPTIONEE  WHO

                                       7
<PAGE>

EXERCISES AN OPTION BETWEEN THE RECORD DATE AND THE  DISTRIBUTION  DATE FOR SUCH
STOCK DIVIDEND SHALL BE ENTITLED TO RECEIVE, ON THE DISTRIBUTION DATE, THE STOCK
DIVIDEND  WITH RESPECT TO THE SHARES OF COMMON STOCK  ACQUIRED  UPON SUCH OPTION
EXERCISE,  NOTWITHSTANDING  THE FACT THAT SUCH SHARES WERE NOT OUTSTANDING AS OF
THE CLOSE OF BUSINESS ON THE RECORD DATE FOR SUCH STOCK DIVIDEND.

(c) EFFECTIVE DATE AND TERM OF PLAN. THE PLAN SHALL BECOME EFFECTIVE ON THE DATE
ON WHICH IT IS ADOPTED BY THE BOARD, BUT THE CLASSIFICATION OF AN OPTION GRANTED
TO A  PARTICIPANT  UNDER  THE  PLAN  AS  AN  INCENTIVE  STOCK  OPTION  SHALL  BE
CONDITIONED UPON THE APPROVAL OF THE PLAN BY THE COMPANY'S  STOCKHOLDERS  WITHIN
ONE YEAR OF THE  EFFECTIVE  DATE OF THE PLAN.  NO AWARD GRANTED TO A PARTICIPANT
AFTER THE FIRST  ANNIVERSARY  OF THE EFFECTIVE DATE OF THE PLAN THAT IS INTENDED
TO COMPLY WITH SECTION 162(M) SHALL BECOME EXERCISABLE, VESTED OR REALIZABLE, AS
APPLICABLE  TO SUCH  AWARD,  UNLESS AND UNTIL THE PLAN HAS BEEN  APPROVED BY THE
COMPANY'S STOCKHOLDERS TO THE EXTENT STOCKHOLDER APPROVAL IS REQUIRED BY SECTION
162(M) IN THE MANNER REQUIRED UNDER SECTION 162(M)  (INCLUDING THE VOTE REQUIRED
UNDER  SECTION  162(M)).  NO AWARDS  SHALL BE  GRANTED  UNDER THE PLAN AFTER THE
COMPLETION  OF TEN YEARS FROM THE  EARLIER OF (I) THE DATE ON WHICH THE PLAN WAS
ADOPTED  BY THE BOARD OR (II) THE DATE THE PLAN WAS  APPROVED  BY THE  COMPANY'S
STOCKHOLDERS, BUT AWARDS PREVIOUSLY GRANTED MAY EXTEND BEYOND THAT DATE.

(d) AMENDMENT OF PLAN. THE BOARD MAY AMEND, SUSPEND OR TERMINATE THE PLAN OR ANY
PORTION  THEREOF AT ANY TIME,  PROVIDED  THAT TO THE EXTENT  REQUIRED BY SECTION
162(M),  NO AWARD GRANTED TO A PARTICIPANT  AFTER THE FIRST  ANNIVERSARY  OF THE
EFFECTIVE DATE OF THE PLAN AND AFTER THE DATE OF SUCH AMENDMENT THAT IS INTENDED
TO COMPLY WITH SECTION 162(M) SHALL BECOME EXERCISABLE, REALIZABLE OR VESTED, AS
APPLICABLE  TO SUCH  AWARD,  UNLESS  AND UNTIL  SUCH  AMENDMENT  SHALL HAVE BEEN
APPROVED BY THE COMPANY'S STOCKHOLDERS ARE REQUIRED BY SECTION 162(M) (INCLUDING
THE VOTE REQUIRED UNDER SECTION 162(M)).

(e)  GOVERNING  LAW. THE  PROVISIONS  OF THE PLAN AND ALL AWARDS MADE  HEREUNDER
SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO ANY APPLICABLE CONFLICTS OF LAW.

                                       8

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