PACIFIC AEROSPACE & ELECTRONICS INC
EXHIBIT 10.2
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<TYPE>EX-10.2
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<FILENAME>f80483ex10-2.txt
<DESCRIPTION>EXHIBIT 10.2
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                                                                   EXHIBIT 10.2

                     [LETTERHEAD OF KEYBANK OF WASHINGTON]


March 15, 2002

Pacific Aerospace and Electronics Inc.                          VIA MAIL AND FAX
434 Olds Station Road
Wenatchee, WA  98801

Attn: Charlie Miracle; Donald Wright

Re: Loans #357577-9001 & 357577-9002 and Lease #8800017858

Gentlemen:

Pacific Aerospace and Electronics Inc. is currently out of compliance with all
financial covenants related to the above referenced obligations. In addition,
the loans and the lease are past due for several payments each.

The Bank has elected, as you know, to forbear from enforcing its remedies
regarding the financial covenant violations and payment defaults so long as
Pacific Aerospace and Electronics Inc. maintained payments within 90 days of
current status. Forbearance has been intended to provide additional time to the
company to make necessary restructuring and refinancing arrangements that have
been in process for the past several months. We understand these transactions
are now scheduled to close in the next few days, or approximately by March 20,
2002.

Mr. Miracle has advised us that although the company will be able to bring all
loan and lease payment obligations with Key Bank current once the refinancing
process is complete, compliance with all covenants will probably not be possible
for some time. While the Bank is not willing to waive covenants established in
connection with these loans, we will agree to continue to forbear from declaring
covenant defaults until May 31, 2003. Such forbearance is conditioned upon there
being no loan or lease payment delinquency or defaults after April 1, 2002.

Should the company be unable to comply with all covenants by May 31, 2003, the
Bank will be willing to revisit the matter in order to consider continued
forbearance of those covenant violations not met at that time. Such
consideration will be at the sole discretion of the Bank.

Sincerely,

/s/ Monty D. Sampson

Monty D. Sampson
Vice President

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