PACIFIC AEROSPACE & ELECTRONICS, INC.
                             430 OLDS STATION ROAD
                          WENATCHEE, WASHINGTON 98801

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

               INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                     AND RULE 14F-1 PROMULGATED THEREUNDER

           NOTICE OF CHANGE IN THE MAJORITY OF THE BOARD OF DIRECTORS

                               FEBRUARY   , 2002
                             ---------------------

NO VOTE OR OTHER ACTION OF THE SECURITY HOLDERS IS REQUIRED IN CONNECTION WITH
THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED
NOT TO SEND THE COMPANY A PROXY.

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

                                  INTRODUCTION

     This Information Statement is being mailed on or about February   , 2002 to
holders of record on February   , 2002 (the "Record Date") of shares of common
stock, par value $.001 per share ("Common Stock"), of Pacific Aerospace &
Electronics, Inc., a Washington corporation (the "Company" or "PA&E"), in
accordance with the requirements of Section 14(f) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 14f-1 promulgated thereunder.
This Information Statement is being delivered in connection with the appointment
by holders (the "Noteholders") of the Company's 11 1/4% Senior Subordinated
Notes due 2005 (the "Old Notes") of a majority of the members of the Board of
Directors of the Company (the "Board") pursuant to the terms of the transactions
described below, whereby the participating Noteholders will acquire
approximately 97.5% of the outstanding Common Stock of PA&E, on a fully diluted
basis. The appointments will become effective upon consummation of the Exchange
(as more fully described below), following the expiration of the ten-day period
from the date of mailing of this Information Statement required under Rule
14f-1.

     As of February 7, 2002, the Company had 39,315,309 shares of Common Stock
issued and outstanding, the Company's only class of voting securities that would
be entitled to vote for directors at a stockholders' meeting if one were to be
held on such date, each share being entitled to one vote. Upon consummation of
the Transaction (as defined below), the Company will have 100,000,000 shares of
Common Stock and 1,000 shares of Series C Preferred Stock convertible into
approximately 11,982,413,050(1) shares of Common Stock (which Series C Preferred
Stock is entitled to vote with the Common Stock on an as-converted basis at all
times other than as required by law) issued and outstanding.

     Please read this Information Statement carefully. It describes the terms of
a transaction that will result in a change of control of the Company (the
"Transaction"), and contains certain biographical and other information
concerning the executive officers and directors after the Exchange. Information
about the Company, the Exchange and the Transaction also will be sent to you in
a Proxy Statement related to the

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

     1 The number of shares of Common Stock into which the Company's Series C
Preferred Stock will be converted is calculated using a formula that requires
the market price of the Common Stock on the date of the Exchange to determine
certain anti-dilution adjustments under outstanding warrants. For purposes of
computing the number of shares outstanding at the time of the Exchange on a pro
forma basis, the Company has assumed February 1, 2002 is the date of the
Exchange. Any difference in the market price of the Company's Common Stock on
the actual date of the Exchange may result in material differences in the number
of shares into which the Series C Preferred Stock converts.


Company's 2001 annual meeting of Shareholders (the "Proxy Statement"), which
will be filed with the Securities and Exchange Commission (the "SEC"). This
Information Statement is not a solicitation of your vote for any matter. Any
matters which require your vote at the Company's annual meeting of Shareholders
for fiscal 2001 will be set forth in the Proxy Statement, and votes will only be
solicited pursuant to the Proxy Statement. The Proxy Statement and the
accompanying exhibits may be inspected without charge at the public reference
section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC
20549. Copies of this material also may be obtained from the SEC at prescribed
rates. The SEC also maintains a website that contains reports, proxy and
information statements and other information regarding public companies that
file reports with the SEC. Copies of the Proxy Statement may be obtained from
the SEC's website at http://www.sec.gov after it has been filed.

                                        2


                                THE TRANSACTION

CHANGE OF CONTROL

     On January 11, 2002, the Company and holders of approximately 98% of the
outstanding Old Notes (the "Participating Noteholders") entered into an amended
lock-up agreement (the "Amended Lock-Up Agreement"), pursuant to which the
Company and the Participating Noteholders agreed to enter into the Transaction
in order to restructure the Company's debt and equity. The Amended Lock-Up
Agreement, as amended, replaced in full lock-up agreements that were originally
entered into by the Company and the Participating Noteholders on September 7,
2001, and October 19, 2001, and expires on March 15, 2002, or upon consummation
of the Transaction, if earlier. The Amended Lock-Up Agreement provides that as
part of the Transaction the Noteholders will exchange their outstanding Old
Notes, including accrued interest, for a combination of Common Stock,
convertible preferred stock and new notes (the "Exchange"), as more fully
described below. Upon the full completion of the Transaction as set forth in the
Amended Lock-Up Agreement, the Noteholders would own approximately 97.5% of the
Company's Common Stock on a fully diluted basis. The notes to be issued to the
Noteholders in the Exchange would consist of $15 million of 10% pay-in-kind
senior subordinated notes due 2007. The Company's existing senior secured loan
(the "Senior Debt") matured on December 31, 2001 and the Company is in payment
default (of principal and interest) on the Senior Debt. The Company's existing
senior secured lenders have the right to demand repayment of the Senior Debt at
any time and foreclose on the Company's assets securing the Senior Debt. The
existing senior secured lenders have not taken any such action to date, and the
Company does not believe that the existing senior secured lenders will exercise
their rights if the New Senior Notes (as defined below) are issued and the
Senior Debt is repaid in the manner contemplated in the Amended Lock-Up
Agreement. However, there can be no assurance that the existing senior secured
lenders will continue to provide forbearance. All share numbers and ownership
percentages in this Information Statement are calculated under the assumption
that no Noteholders other than Participating Noteholders are participating in
the Exchange. If Noteholders other than the Participating Noteholders
participate in the Exchange, such share numbers and ownership percentages will
change in immaterial respects.

     The Amended Lock-Up Agreement sets forth the material terms of the
Transaction, including the Exchange. The Exchange is expected to be consummated
by March 15, 2002, or as soon as possible after expiration of the 10-day period
from the date of mailing of this Information Statement required under Rule
14f-1. The Amended Lock-Up Agreement was filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 30, 2001 as filed
with the SEC on January 14, 2002 and Amendment No. 1 to the Amended Lock-up
Agreement was filed as an exhibit to the Company's Report on Form 8-K as filed
with the SEC on February 7, 2002.

     The Exchange will result in a change of control of the Company, and, in
connection with the Exchange, the Board will be reconstituted to consist of five
directors, each of whom will be designated by the Participating Noteholders.

     The Participating Noteholders have waived defaults arising under the
Indenture governing the terms of the Old Notes (the "Indenture") through the
consummation of the Exchange or the termination of the Amended Lock-Up
Agreement. The Participating Noteholders hold a sufficient principal amount of
the Old Notes to waive such defaults under the Indenture on behalf of all the
Noteholders.

THE EXCHANGE

     After expiration of the 10-day period from the date of the mailing of this
Information Statement required under Rule 14f-1, the Company and the
Participating Noteholders will consummate the Exchange. The Exchange will be
consummated pursuant to an exchange agreement (the "Exchange Agreement") whereby
the Participating Noteholders will exchange approximately $62.5 million
aggregate principal amount of Old Notes, and accrued interest thereon, for: (i)
shares of Common Stock of the Company in an amount sufficient to give the
Participating Noteholders a majority of the outstanding Common Stock of the
Company; (ii) 1,000 shares of convertible preferred stock of the Company (the
"New Preferred"), which will be

                                        3


automatically convertible, upon an increase in the Company's authorized Common
Stock, into that number of shares of Common Stock which, when added to the
Common Stock issued in the Exchange, will be sufficient to give the
Participating Noteholders beneficial ownership of 97.5% of the Company's
outstanding Common Stock, on a fully diluted basis, upon completion of the
Transaction; and (iii) $15 million in aggregate principal amount of new 10%
senior subordinated pay-in-kind notes due 2007 (the "PIK Notes"). Concurrent
with the consummation of the Exchange, the Participating Noteholders will enter
into a supplemental indenture amending the indenture governing the Old Notes to
remove all of the covenants therein, except for those covenants relating to the
payment of interest, premium, if any, and principal on the Old Notes. Upon
consummation of the Transaction, the Participating Noteholders will beneficially
own approximately 97.5% of the outstanding shares of Common Stock of the Company
on a fully-diluted basis, as well as the PIK Notes.

     The New Preferred will be automatically converted (the "Automatic
Conversion") into that number of shares of Common Stock of the Company which,
when added to the shares of Common Stock distributed to the Participating
Noteholders in the Exchange, will equal approximately 97.5% of the outstanding
shares of Common Stock of the Company on a fully-diluted basis. The Automatic
Conversion of the New Preferred into Common Stock will take place immediately
following shareholder approval of an increase in the number of authorized shares
of Common Stock to an amount sufficient to effect the conversion of the New
Preferred in full. This Information Statement is not a solicitation of your vote
for approval of the increase in the number of authorized shares of Common Stock.
Your vote for approval of the increase in the number of authorized shares of
Common Stock will be solicited only pursuant to the Proxy Statement. Upon the
completion of the Automatic Conversion, the Transaction will have been
consummated. Until the Automatic Conversion occurs, the New Preferred will have
an aggregate liquidation preference equal to $45 million and will have a
cumulative dividend rate of 10% per annum, which will automatically increase to
14% per annum if the Automatic Conversion has not occurred on or before June 1,
2002. The New Preferred will rank senior to all other classes of capital stock
of the Company as to liquidation and distributions. In addition, the New
Preferred will be entitled to vote with the Common Stock on all matters brought
before the Common Stock for approval (other than as required by law) and will be
entitled to that number of votes equal to the number of shares of Common Stock
into which the New Preferred is then convertible.

     The New Preferred will also entitle the holders thereof to appoint all five
(5) members of the Company's Board of Directors. The Participating Noteholders
have agreed that one member of the Board of Directors will continue to be the
Company's Chief Executive Officer. Following the Automatic Conversion, the
Company anticipates effecting a reverse stock split in order to reduce the
number of shares of Common Stock outstanding after completion of the
Transaction.

     The PIK Notes will bear interest at a rate of 10% per annum, which will
increase to 14% per annum if the Automatic Conversion has not occurred on or
before June 1, 2002. Interest on the PIK Notes will be payable semi-annually in
additional PIK Notes. The PIK Notes will mature in November 2007, but the
Company may pay off or otherwise redeem the PIK Notes in full or in part at any
time prior to the maturity date without penalty. The PIK Notes will be unsecured
senior subordinated obligations of the Company and its U.S. subsidiaries and
will rank senior as to liquidation to all other subordinated debt of the Company
and its U.S. subsidiaries.

ADDITIONAL DEVELOPMENTS RELEVANT TO THE TRANSACTION

     On October 5, 2001, the Company entered into an agreement with the holders
of its Senior Debt pursuant to which such holders agreed to waive the Company's
payment defaults and certain other defaults until December 31, 2001. The Company
did not complete its restructuring plan by December 31, 2001 and the agreement
with the Company's existing senior lenders expired on that date. The Company is
now in default under its Senior Debt because of (i) its failure to make the
August 1, 2001 interest payment on the Old Notes within the applicable grace
period and (ii) its subsequent failure to repay the Senior Debt on December 31,
2001, the maturity date. Although the Company also failed to make the quarterly
interest payment that was due on the Senior Debt on September 30, 2001, the
September 30 interest payment was paid in kind in lieu of cash by increasing the
outstanding principal amount of the Senior Debt. As a result of the existing
defaults, however, the holders of the Senior Debt currently have the right to
demand payment of all amounts
                                        4


outstanding under the Senior Debt and to pursue additional recourse against the
Company, including foreclosure. The loan agreement governing the Senior Debt
provides for an interest rate on the Senior Debt of 21%.

     In order to repay the Senior Debt and provide the Company with additional
working capital, GSC Partners, an affiliate of GSC Recovery, Inc. (one of the
Participating Noteholders) which will own 53.53% of the Company's Common Stock
on a fully-diluted basis following the Exchange ("GSC Partners"), intends to
purchase new Senior Secured Notes (the "New Senior Notes") for gross proceeds to
the Company of approximately $22.0 million. Proceeds from the sale of the New
Senior Notes will be used by the Company to repay the Senior Debt, for working
capital, to pay certain fees and expenses of the Company's restructuring and for
general corporate purposes. The New Senior Notes will accrete through their 2007
maturity to $36.0 million aggregate principal amount and will be issued at a
discount to par equal to 61.08% of the face amount thereof. The New Senior Notes
will bear interest at a rate of 5.0% per annum. Interest on the New Senior Notes
will be payable semi-annually in cash. The New Senior Notes will mature on May
1, 2007, but the Company may redeem the New Senior Notes in full or in part at
any time prior to the maturity date at a premium over the accreted value of the
New Senior Notes that declines over time. The New Senior Notes will be secured
by all of the assets of the Company and its U.S. subsidiaries and will rank
senior as to liquidation to all other debt of the Company and its U.S.
subsidiaries. The New Senior Notes will also be secured by the pledge of the
stock of the Company's non-U.S. subsidiaries. The New Senior Notes will contain
customary covenants and restrictions, including without limitation a restriction
on the Company's ability to incur additional indebtedness. The Company expects
that the Exchange will be completed concurrently with the sale of the New Senior
Notes.

     Additionally, the Company has been notified by one of its secured lenders
that it is not in compliance with certain covenants of loans that are secured by
a deed of trust on the Company's headquarters building and other assets of the
Company and its subsidiaries. The lender has, to date, agreed not to exercise
its remedies, but the Company can provide no assurance that the lender will
continue to forbear until the Company can regain compliance with those
covenants, if at all.

     The Company will need to raise additional cash to make future payments on
its debt and to fund its operations. If the Company is unable to obtain
sufficient cash when needed to fund its operations, to make its loan payments,
and to pay its other obligations when due, it may be forced to seek protection
from creditors under the bankruptcy laws.

RIGHT TO DESIGNATE DIRECTORS

     After completion of the Exchange, the Participating Holders will be
entitled, by virtue of their holdings of New Preferred, to nominate and elect
all five members of the Company's Board. Additionally, the Company, the
Participating Noteholders and the Company's Chief Executive Officer and Chief
Operating Officer, will each enter into the Exchange Agreement agreeing to vote
shares of Common Stock beneficially owned by them with the Participating
Noteholders (as described in more detail below).

     The parties to the Exchange Agreement will agree to vote their shares of
the Company's stock to ensure that (i) the Company amends its existing Articles
of Incorporation to increase the number of authorized shares of Common Stock in
order to effect the conversion of the New Preferred in full; (ii) the Board
consists of five members; and (iii) the Participating Noteholders will have the
ability to appoint all five members to the Board. The Board members appointed by
the Participating Noteholders will initially be Robert A. Hamwee, Matthew C.
Kaufman, Richard W. Detweiler and Carl H. Goldsmith. Messrs. Hamwee, Kaufman and
Detweiler were appointed to the Board by GSCP Recovery, Inc. and Mr. Goldsmith
was appointed to the Board by M.W. Post Advisory Group L.L.C. The remaining
member of the Company's Board will be the Company's Chief Executive Officer,
Donald A. Wright, who will also be appointed by the Participating Noteholders.
Mr. Kaufman will serve as Chairman of the Board.

                                        5


APPOINTMENTS TO THE BOARD

     Simultaneously with the closing of the Exchange, Werner Hafelfinger, Dale
L. Rasmussen, Gene C. Sharratt, Robert M. Stemmler and William A. Wheeler will
resign as members of the Board (and Werner Hafelfinger will also resign as a
member of each of the boards of directors of the Company's subsidiaries) and
will be replaced by Robert A. Hamwee, Matthew C. Kaufman, Richard W. Detweiler
and Carl H. Goldsmith, the designated appointees of the Participating
Noteholders. Messrs. Hamwee, Kaufman, Detweiler and Goldsmith have consented to
be appointed as members of the Board and may be appointed as members of the
boards of directors of the Company's subsidiaries as necessary or appropriate
after their appointment to the Company's Board. Pursuant to the Exchange
Agreement, Donald A. Wright will remain a member of the Company's Board.

     The Noteholders have informed the Company that following the Exchange, the
only committees of the Company's Board that the Noteholders intend to keep in
effect are the Finance and Audit Committee and the Compensation Committee.

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Other than as specifically disclosed herein regarding changes that will
occur as a result of the Transaction, the information regarding beneficial
ownership required by Item 403 of Regulation S-K is incorporated by reference to
the Company's Form 10-K/A for the fiscal year ended May 31, 2001, as filed with
the Securities and Exchange Commission on September 28, 2001.

     The following table shows pro forma Common Stock ownership of the Company
following consummation of the Exchange (calculated as if the Exchange had
occurred on February 1, 2002) by (1) each person who will own beneficially more
than 5% of the outstanding Common Stock; (2) each of the Company's directors and
those nominated to become directors as part of the Exchange; (3) the executive
officers of the Company; and (4) all executive officers and the current
directors of the Company as a group. Except as otherwise noted, the Company
believes the persons listed below have sole investment and voting power with
respect to the Common Stock owned by them.



                                                            AMOUNT AND NATURE OF      PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER:                      BENEFICIAL OWNERSHIP(+)   COMMON STOCK(1)
- -------------------------------------                      -----------------------   ---------------
                                                                               
Robert A. Hamwee(2)......................................       6,606,541,835             99.06%
  GSCP Recovery, Inc.
  500 Campus Drive, Suite 220
  Florham Park, NJ 07932
Matthew C. Kaufman(2)....................................       6,606,541,835             99.06%
  GSCP Recovery, Inc.
  500 Campus Drive, Suite 220
  Florham Park, NJ 07932
Richard W. Detweiler.....................................                   0                 *
  Carlisle Enterprises, L.L.C.
  7777 Fay Avenue, Suite 200
  La Jolla, CA 92037
GSCP Recovery, Inc.(3)...................................       6,606,541,835             99.06%
  500 Campus Drive, Suite 220
  Florham Park, NJ 07932
Carl H. Goldsmith(4).....................................       3,306,163,449             97.73%
  M.W. Post Advisory Group L.L.C.
  1880 Century Park East, Suite 820
  Los Angeles, CA 90067
M.W. Post Advisory Group L.L.C.(5).......................       3,306,163,449             97.73%
  1880 Century Park East, Suite 820
  Los Angeles, CA 90067


                                        6




                                                            AMOUNT AND NATURE OF      PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER:                      BENEFICIAL OWNERSHIP(+)   COMMON STOCK(1)
- -------------------------------------                      -----------------------   ---------------
                                                                               
Alliance Capital Management, L.P.(6).....................       1,639,101,156             95.14%
  1345 Avenue of the Americas, 39th Floor
  New York, NY 10105
William E. Simon & Sons Special Situation Partners II,            482,088,575             84.45%
  L.P.(7)................................................
  10990 Wilshire Blvd., Suite 500
  Los Angeles, CA 90024
DDJ Capital Management, LLC(8)...........................          68,021,314             42.83%
  141 Linden St., #S-4
  Wellesley, MA 02482
Strong River Investments, Inc.(9)........................          98,222,019             51.96%
  c/o Gonzales-Ruiz & Aleman (BVI) Limited
  Wickhams Cay 1, Vanterpool Plaza
  P.O. Box 873
  Road Town, Tortolla - BVI
Bay Harbor Investments, Inc.(9)..........................          98,222,019             51.96%
  c/o Gonzales-Ruiz & Aleman (BVI) Limited
  Wickhams Cay 1, Vanterpool Plaza
  P.O. Box 873
  Road Town, Tortolla - BVI
Donald A. Wright(10).....................................             778,145                 *
  c/o Pacific Aerospace & Electronics, Inc.
  430 Olds Station Road, Third Floor
  Wenatchee, WA 98801
Werner Hafelfinger(11)...................................             222,260                 *
  c/o Pacific Aerospace & Electronics, Inc.
  430 Olds Station Road, Third Floor
  Wenatchee, WA 98801
Sheryl A. Symonds(12)....................................             352,963                 *
  c/o Pacific Aerospace & Electronics, Inc.
  430 Olds Station Road, Third Floor
  Wenatchee, WA 98801
Charles Miracle(13)......................................              11,121                 *
  c/o Pacific Aerospace & Electronics, Inc.
  430 Olds Station Road, Third Floor
  Wenatchee, WA 98801
Dale L. Rasmussen(14)....................................              40,492                 *
  c/o IMPCO Technologies, Inc.
  708 Industrial Drive
  Tukwila, WA 98807
Gene C. Sharratt, Ph.D.(15)..............................              12,500                 *
  c/o North Central Educational Service District
  P.O. Box 1847
  Wenatchee, WA 98807
Robert M. Stemmler(16)...................................              28,137                 *
  c/o IMPCO Technologies, Inc.
  16804 Gridley Place
  Cerritos, CA 90703
William A. Wheeler(17)...................................              35,592                 *
  2011 Lombard Lane
  Yakima, WA 98902
All executive officers and current directors as a group         9,914,069,772             99.61%
  (8 persons)(18)........................................


                                        7


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

   * Less than 1%.

 (+) Shares that a person has the right to acquire by exercise or conversion as
     of February 1, 2002 (pro forma for the Exchange as if it had occurred on
     that date) or within 60 days of such date are treated as outstanding for
     determining the amount and percentage of Common Stock owned by such person
     but are not deemed to be outstanding as to any other person or group.

 (1) This figure represents the percent ownership of each party upon conversion
     of the Series C Preferred Stock assuming that no other party converts its
     Series C Preferred. However, the terms of the Series C Preferred Stock
     require that it all be converted at the same time. Thus, the actual
     ownership percentage of each party holding Series C Preferred Stock will be
     lower than as set forth in the table.

 (2) Includes 28,263,314 shares of common stock and shares of Series C Preferred
     Stock convertible into 6,578,278,521 shares of the Company's common stock
     issued to GSCP Recovery, Inc. in connection with the Company's
     restructuring. Messrs. Kaufman and Hamwee are officers of GSCP Recovery,
     Inc. Messrs. Kaufman and Hamwee disclaim beneficial ownership with respect
     to the shares of the Company held by GSCP Recovery, Inc.

 (3) Includes 28,263,314 shares of common stock and shares of Series C Preferred
     Stock convertible into 6,578,278,521 shares of the Company's common stock
     issued in connection with the Company's restructuring.

 (4) Includes 14,144,031 shares of common stock and shares of Series C Preferred
     Stock convertible into 3,292,019,417 shares of the Company's common stock
     issued to M.W. Post Advisory Group L.L.C. in connection with the Company's
     restructuring. Mr. Goldsmith is an officer of M.W. Post Advisory Group
     L.L.C. ("M.W. Post"). Mr. Goldsmith disclaims beneficial ownership with
     respect to the shares of the Company held by M.W. Post.

 (5) Includes 14,144,031 shares of common stock and shares of Series C Preferred
     Stock convertible into 3,292,019,417 shares of the Company's common stock
     issued in connection with the Company's restructuring.

 (6) Includes 7,012,206 shares of common stock and shares of Series C Preferred
     Stock convertible into 1,632,088,950 shares of the Company's common stock
     issued in connection with the Company's restructuring.

 (7) Includes 2,062,413 shares of common stock and shares of Series C Preferred
     Stock convertible into 480,026,162 shares of the Company's common stock
     issued in connection with the Company's restructuring.

 (8) Includes warrants to purchase 4,036,978 shares of common stock at an
     exercise price of $.001 per share held by affiliates of DDJ Capital
     Management, LLC, as follows: B III Capital Partners, L.P. -- 1,883,923
     shares; DDJ Canadian High Yield Fund -- 538,263 shares; B III-A Capital
     Partners, L.P. -- 807,396 shares; State Street Bank & Trust,
     Custodian -- 807,396 shares. The Exchange transaction triggered an
     anti-dilution adjustment under each of the warrants listed above in this
     footnote, increasing the number of shares of common stock receivable upon
     exercise of these warrants to an aggregate of 68,021,314 shares. The
     exercise price of each of the warrants remains at $.001 per share, the par
     value of the Company's common stock.

 (9) Includes warrants to purchase 192,500 shares of common stock at an exercise
     price of $2.01 per share. The Exchange transaction triggered an
     anti-dilution adjustment under the warrants increasing the number of shares
     of common stock receivable upon exercise of these warrants to an aggregate
     amount of 98,222,019. The exercise price of the warrants was adjusted
     downward to equal the per share purchase price of the equity securities
     issued in the Exchange.

(10) Includes (a) 674,145 shares of common stock, (b) 4,000 shares issuable upon
     exercise of public warrants and (c) 100,000 shares issuable upon exercise
     of a private warrant. Pursuant to the Exchange, Mr. Wright has agreed to
     cancel all of his existing options in exchange for the grant of new options
     at or following the Exchange.

                                        8


(11) Includes 222,260 shares of common stock. Pursuant to the Exchange, Mr.
     Hafelfinger has agreed to cancel all of his existing options in exchange
     for the grant of new options at or following the Exchange.

(12) Includes (a) 54,963 shares of common stock, (b) 500 shares issuable upon
     exercise of public warrants, (c) 297,500 shares issuable upon exercise of
     vested stock options.

(13) Includes (a) 3,621 shares of common stock and (b) 7,500 shares issuable
     upon exercise of vested stock options.

(14) Includes (a) 10,492 shares of common stock and (b) 30,000 shares issuable
     upon exercise of vested stock options.

(15) Includes (a) no shares of common stock and (b) 12,500 shares issuable upon
     exercise of vested stock options.

(16) Includes (a) 1,500 shares of common stock and (b) 26,637 shares issuable
     upon exercise of vested stock options.

(17) Includes (a) 5,592 shares of common stock and (b) 30,000 shares issuable
     upon exercise of vested stock options.

(18) Includes (a) 43,362,334 shares of common stock, (b) shares of Series C
     Preferred Stock convertible into 9,870,297,938 shares of the Company's
     common stock, (c) 100,000 shares issuable upon exercise of private
     warrants, (d) 4,500 shares issuable upon exercise of public warrants and
     (e) 305,000 shares issuable upon exercise of vested stock options. Does not
     include securities held by current directors who will be resigning from the
     Board of Directors on the date of the Exchange.

                                        9


               DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

     The information regarding the Company's current directors and executive
officers required by Item 7 of Schedule 14A of Regulation 14A is incorporated by
reference to the Company's Form 10-K/A for the fiscal year ended May 31, 2001,
as filed with the Securities and Exchange Commission on September 28, 2001. In
addition, as of January 29, 2002, the Company's Board of Directors appointed
Charles A. Miracle as the Company's Vice President, Finance and Chief Financial
Officer. Prior to this appointment, Mr. Miracle served as the Company's
Treasurer and Interim Chief Financial Officer since August 2001. Mr. Miracle is
continuing his appointment as the Company's Treasurer. Prior to that time, Mr.
Miracle served as the Company's corporate controller since 1998. Mr. Miracle was
previously an employee with the public accounting firm of Cordell, Neher &
Company, P.L.L.C. from 1992 to 1998. Mr. Miracle is a certified public
accountant.

DIRECTOR APPOINTEES



NAME                                                          AGE   POSITION
- ----                                                          ---   --------
                                                              
Robert A. Hamwee............................................   31   Nominee
Matthew C. Kaufman..........................................   31   Nominee
Richard W. Detweiler........................................   60   Nominee
Carl H. Goldsmith...........................................   36   Nominee


     ROBERT A. HAMWEE.  Mr. Hamwee is a Managing Director of GSC Partners, which
he joined in 1994. GSC Partners is an affiliate of GSCP Recovery, Inc. which
will own approximately 53.53% of the Company's Common Stock on a fully-diluted
basis following the Exchange. Mr. Hamwee was previously with The Blackstone
Group, where he worked on a wide range of assignments in the Merchant Banking,
Mergers & Acquisitions and Restructuring departments. He is Chairman of the
Board of Axiohm Transaction Solutions, Inc. and Envirosource, Inc. and a
director of RAM Holdings Limited and Scovill Fasteners, Inc.

     MATTHEW C. KAUFMAN.  Mr. Kaufman is a Managing Director with GSC Partners,
which he joined in 1997. GSC Partners is an affiliate of GSCP Recovery, Inc.
which will own approximately 53.53% of the Company's Common Stock on a
fully-diluted basis following the Exchange. Mr. Kaufman was, from 1996 to 1997,
Director of Corporate Finance with NextWave Telecom, Inc. Prior to that, he was
with The Blackstone Group, in the Merchant Banking and Mergers & Acquisitions
departments. He is a director of Day International Group, Inc., Waddington North
America, Inc. and Globecom Interactive, Inc.

     RICHARD W. DETWEILER.  Mr. Detweiler has been, since 1996, Managing
Director and part owner of Carlisle Enterprises, LLC, a private equity
investment firm. Prior to that, Mr. Detweiler was Chairman and CEO of Precision
Aerotech, Inc., a publicly traded diversified manufacturing firm and had general
management responsibilities for subsidiaries of Caterpillar, Sundstrand and
Navistar. Mr. Detweiler started his career in finance and served as Chief
Financial Officer for Caterpillar's Solar Turbines subsidiary. He is currently a
director of Treesource Industries, Inc. and RBX Corporation.

     CARL H. GOLDSMITH.  Mr. Goldsmith is a Managing Director of M.W. Post
Advisory Group, LLC, which he joined in 1994. Following the Exchange, M.W. Post
Advisory Group, LLC will own approximately 26.79% of the Company's Common Stock
on a fully-diluted basis. Mr. Goldsmith was previously with
PricewaterhouseCoopers LLP, where he worked on a wide range of assignments in
the Valuation and Corporate Recovery departments. He is a director of Imperial
Technology, Inc.

                                        10


                COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

     The information regarding executive compensation required by Item 402 of
Regulation S-K is incorporated by reference to the Company's Form 10K/A for the
fiscal year ended May 31, 2001, as filed with the Securities and Exchange
Commission on September 28, 2001.

EMPLOYMENT AGREEMENTS

     The Amended Lock-Up Agreement provides that the Company will enter into new
employment agreements with each of Donald A. Wright and Werner Hafelfinger under
similar terms as their existing employment agreements. The new employment
agreements, which will be effective as of the date of the Exchange, provide for
annual base salaries of $265,000 and $185,000 for Mr. Wright and Mr.
Hafelfinger, respectively, with annual increases of 5% of their base annual
salary. If either Mr. Wright or Mr. Hafelfinger is terminated without cause, or
if they have good reason to resign, as those terms are defined in their
employment agreements, the Company will be required to make severance payments
to them. The Amended Lock-Up Agreement also provides for an employee option
pool, 50% of which shall be allocated to Mr. Wright and 25% of which shall
allocated to Mr. Hafelfinger. Sheryl A. Symonds will continue serving as Vice
President Administration and General Counsel of the Company until February 28,
2002.

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information regarding related transactions required by Items 404(a),
(b) and (c) of Regulation S-K is incorporated by reference to the Company's Form
10-K/A for the fiscal year ended May 31, 2001, as filed with the Securities and
Exchange Commission on September 28, 2001.

                                          By Order of the Board of Directors

                                                 /s/ DONALD A. WRIGHT

                                          --------------------------------------
                                                     DONALD A. WRIGHT
                                                 Chief Executive Officer

February 7, 2002

                                        11