8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of report (date of earliest event reported):  June 26, 2009

PACIFIC ALLIANCE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	000-51777	87-044584-9
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1661 Lakeview Circle

Ogden, Utah  84403

(Address of principal executive offices) (Zip Code)

801-399-3632

(Registrant’s telephone number, including area code)

___________________

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

£  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

£  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

£  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

£  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On June 26, 2009, Pacific Alliance Corporation, a Delaware corporation “Pacific,” entered into an Exchange Agreement (the “Exchange Agreement”) with Superior Filtration Products, LLC, a Florida limited liability Company (“Superior”),  and the members of Superior  (“Superior Members”). A copy of the Exchange Agreement is attached hereto as Exhibit 2.1.

Superior is in the business of manufacturing and marketing air filtration products. Superior offers a broad line of air filtration products and related equipment and hardware.  These products are marketed through both big box retail and independent distributor networks to the end users.  Superior began operations in January of 2008.  Superior designs, manufactures and markets a broad range of air filtration products, including (i) high-end High Efficiency Particulate Air (HEPA) filters, with at least 99.97% efficiency, and Absolute Isolation Barriers for the creation of synthesized atmospheres to control manufacturing environments and for the absolute control and containment of contaminants and toxic gases in certain manufacturing processes: (ii) mid-range filters for individual and commercial use, which fall under specifications which are categorized by efficiency ratings established by the American Society of Heating Refrigeration and Air Conditioning Engineers ("ASHRAE"); and (iii) standard-grade, low cost filters typically off-the-shelf for standard residential and commercial furnace and air conditioning applications.  Superior’s headquarters are located in Ogden, Utah.

Pursuant to, and subject to, the terms and conditions of the Exchange Agreement, Pacific intends to acquire all of the issued and outstanding Superior membership interests in exchange for 1,000,000 shares of Pacific Series A Preferred Stock (the “Acquisition”).   If the Acquisition is closed, of which there can be no assurance, Superior will be a wholly-owned subsidiary of Pacific and the Superior Members will be controlling stockholders of Pacific. The 1,000,000 Shares of Pacific Series A Preferred Stock to be issued in the Acquisition, will be convertible into 606,600,000 shares of Pacific common stock subject to adjustment for any future reverse stock split.  The shares of Series A Preferred Stock may not be converted into common stock until Pacific either completes a reverse stock split or increases its authorized capital or both.  Pacific anticipates that in the future Pacific will seek stockholder approval to effect a 1-for-20 reverse stock split.  If such reverse stock split were to occur, of which there can be no assurance, the 606,600,000 shares of Pacific common stock issuable upon the conversion of the Series A Preferred Stock into Pacific common stock, would be reduced to 30,330,000 shares of Pacific common Stock.

Pacific anticipates that it will attempt to raise additional cash capital from the sale of its securities in order to repay debt and to be used for working capital in Superior’s operations.  Pacific is also discussing the conversion of some of its outstanding debt into shares of its common stock.  The exact terms of such debt conversion, the amount of debt to be converted and the number of shares of Pacific common stock to be issued in connection with the debt conversion, has not been determined.

Pacific anticipates that if it is able to convert a portion of its outstanding debt into equity and raise additional cash from the sale of is securities, and assuming the Exchange Agreement is closed, the Superior Members will own more than 80% of Pacific’s issued and outstanding shares of common stock assuming they convert their Series A Preferred Stock into common stock.

The closing of the Exchange Agreement is subject to numerous conditions and there can be no assurance that the Acquisition will be completed.

2

The Exchange Agreement provides that if the Acquisition is closed, the three current directors of Pacific will remain as directors of Pacific and two additional directors designated by Superior’s Members will appointed as directors of Pacific.  If the Acquisition is closed, we anticipate that the current President, Vice President and Treasurer of Pacific will resigned from their position and that Steven Clark will be appointed as our CEO, President and Treasurer.  Pacific’s current Secretary, David Knudson, is expected to remain as our corporate secretary.

Sycamore Ventures, LLC, Series 1 (“Sycamore”), an affiliate of Pacific’s current president, Mark Scharmann, and Pacific's current Secretary/Treasurer, David Knudson has agreed to loan Superior $250,000 for Superior’s use as working capital prior to the closing of the Exchange Agreement.  Such loan is to be secured by the receivables, general intangibles and chattel paper of Superior.  In exchange for Sycamore agreeing to make such loan to Superior, Pacific has agreed to issue Sycamore warrants to purchase 500,000 shares of Pacific’s common stock at a price of $0.05 per share.  Such warrants will be exercisable for a term of five years.  If Pacific completes a 1-for-20 reverse stock split, the Warrant will entitle Sycamore to purchase 25,000 shares of Pacific common stock at a price of $1.00 per share.

The Exchange Agreement contains customary representations and warranties, pre-closing covenants, and closing conditions, including approval of the Exchange and related transactions.

The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Exchange Agreement, which is filed as Exhibit 2.1 hereto and incorporated herein by reference.   Also attached hereto as exhibits are (i) a form of Certificate of Designation of Series A Convertible Preferred Stock; and (ii) the Warrant to be issued to Sycamore.

As of the date of the Exchange Agreement and currently, there were no material relationships between Pacific, or its affiliates, and Superior, other than as contemplated by the Exchange Agreement or the loan with Sycamore described above.

Item 9.01 Financial Statements and Exhibits

Exhibit	Description
2.1 3.1 4.1	Exchange Agreement dated June 26, 2009. Certificate of Designation of Series A Convertible Preferred Stock Warrant Agreement

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PACIFIC ALLIANCE CORPORATION

(Registrant)

Date:  June 26, 2009

By:  /s/ Mark A. Scharmann

Mark A. Scharmann, President

3

EX-2.1

Exhibit 2.1

Pacific Alliance Corporation

Form 8-K

File No. 000-51777

EXCHANGE AGREEMENT

by and among

Superior Filtration Products, LLC,

a Florida limited liability company,

and

the Members of

Superior Filtration Products, LLC,

on the one hand;

and

Pacific Alliance Corporation,

a Delaware corporation,

on the other hand

EXCHANGE AGREEMENT

This Exchange Agreement (the “Agreement”) is made and entered into effective this 26th day of June, 2009 by and among Superior Filtration Products, LLC, a Florida limited liability company (“Superior”), and the Members of Superior listed on the signature page hereof (“Signature Page”) (each, a “Superior Member,” collectively, the “Superior Members”), on the one hand; and Pacific Alliance Corporation, a Delaware corporation (“Pacific”), on the other hand.

RECITALS

The Board of Directors of Pacific and the Manager of Superior, have adopted resolutions approving and adopting the proposed transaction whereby Pacific will acquire from the Superior Members all of the issued and outstanding Membership Interests of Superior in exchange for shares of Series A Preferred Stock of Pacific (the "Exchange"), upon the terms and conditions set forth in this Agreement.

Each Superior Member owns the Superior Membership Interests identified on the Signature Page.

Superior will enter into this Agreement for the purpose of evidencing its consent to the consummation of the Exchange and for the purpose of making certain representations, warranties, covenants and agreements.

The parties intend that the terms and conditions of this Agreement comply in all respects with Section 351 of the Internal Revenue Code and the regulations corresponding thereto, so that the Exchange shall qualify as a tax free transaction under the Code.

NOW THEREFORE, for the mutual consideration set out herein, and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties agree as follows:

AGREEMENT

ARTICLE I

THE EXCHANGE AND THE TRANSACTION

1.1           The Exchange.  Upon the terms and subject to the conditions hereof, at the Closing (as hereinafter defined), the Superior Members will sell, convey, assign, transfer and deliver to Pacific, certificates or other evidence representing all issued and outstanding Superior Membership Interests, and Pacific will issue to each Superior Member, in exchange for such Superior Member’s Superior Membership Interests, a stock certificate representing the number of shares of Pacific Series A Preferred Stock (“Exchange Shares”) set forth on the Signature Page.  The parties intend that this transaction qualify as a tax-free transaction under Section 351 of the Internal Revenue Code of 1986, as amended and related sections thereunder. A form of Certificate of Designation of the Series A Preferred Stock (the “Certificate of Designation”) which describes the characteristics of the Exchange Shares is set forth on Exhibit 1.1, attached hereto.

1.2           The Contract Transfer.  As a condition to the Exchange agreed to herein, Superior Member, Steven Clark hereby agrees to transfer to Pacific, all of his, right, title and interest in a certain agreement with Superior Die as described in Exhibit 1.2 attached hereto.

2

1.3           Closing. The closing of the Exchange (the "Closing") shall take place at such time and place as mutually determined by the parties as may be mutually agreed upon by the parties when all conditions precedent have been met and all required documents have been delivered, but in no event later than July 31, 2009 (“Closing Date”). The documents to be delivered at Closing are set forth in Article X of this Agreement.

1.4           Basic Transaction. The transaction agreed to herein (the “Transaction”) is as follows:

(a)           Pacific will acquire all of the outstanding Superior Membership Interests from the Superior Members in exchange for the Exchange Shares.  The total number of Exchange Shares to be issued at Closing will be 1,000,000.  The Exchange Shares will be convertible into shares of Pacific common stock (“Conversion Shares”).  The Conversion Ratio shall be that ratio which will result in the issuance of 606,600,000 shares of Pacific common stock if all 1,000,000 Exchange Shares are converted into Conversion Shares. The number of Exchange Shares to be issued to the Superior Members for each of their Membership Interest is set forth on the Signature Page.

(b)           No registration rights will be granted in connection with the Exchange Shares or the Conversion Shares.

(h)           Prior to or effective at the Closing, the persons listed on Schedule 1.4 shall be appointed and/or elected as officers and directors of Pacific.

1.5           Post Closing Financial Statements.  The parties acknowledge that Pacific is required to file with the SEC a Form 8-K within four days following the Closing. The parties acknowledge that such Form 8-K must provide Form 10 information about Superior.  The parties further acknowledge that the financial statements of Superior required by Regulation of S-X, as adopted by the SEC, together with proforma financial statements, must be filed with such Form 8-K.  The Superior Members shall take all action necessary to provide Pacific with Form 10 information about Superior and to cause such required financial statements to be filed within the required time period.

1.6           General Release.  Each of the Superior Members shall execute and deliver a General Release in the form of Exhibit 1.6 attached hereto.

ARTICLE II

DEFINITIIONS

For purposes of this Agreement and the Exhibits and Schedules attached hereto, the following terms shall have the meanings specified or referred to below, unless the context otherwise requires:

“Affiliate” means with respect to a specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified Person; it being understood and agreed that, for purposes of this definition, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other ownership interest, by contract or otherwise.

“Agreement” means this Exchange Agreement, including all amendments hereof and all Exhibits and Schedules hereto.

“Certificate of Designation” has the meaning set forth in Section 1.1. A copy of the form of Certificate of Designation is set forth as Exhibit 1.1 attached hereto.

3

“Closing” has the meaning set forth in Section 1.3.

“Closing Date” has the meaning set forth in Section 1.3.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock Equivalents” means any securities of Pacific which would entitle the holder thereof to acquire at any time any Pacific common stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, common stock.

“Consent” means any approval, consent, ratification, waiver, or other authorization, release or similar action that is necessary (including any Governmental Authorization).

“Conversion Shares” has the meaning set forth in Section 1.4

“Disclosure Schedule” means the schedule of exceptions attached hereto and incorporated herein.

“Exchange” means the exchange of the Superior Membership Interests for Exchange Shares at the Closing pursuant to the terms and conditions of this Agreement.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Shares” means the shares of Pacific Series A Preferred Stock to be issued to the Superior Members in the Exchange.

“Financial Statements of Superior” has the meaning set forth in Section 4.2.

“Financial Statements of Pacific” has the meaning set forth in Section 5.3.

“GAAP” means United States generally accepted accounting principles as in effect from time to time.

“General Release” – the mutual general release executed by Pacific and each of Sellers in the form attached hereto as Exhibit 1.6.

“Governmental Authorizations” means any:  (a) permit, license, certificate, franchise, concession, approval, consent, ratification, permission, clearance, confirmation, endorsement, waiver, certification, designation, rating, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law; or (b) right under any contract with any Governmental Body.

“Governmental Body” means any (i) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign, or other government; (iii) governmental or quasi-governmental authority of any nature, including any governmental agency, branch, department, board, official, or entity and any court or other tribunal; (iv) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature; and any Person, directly or indirectly, owned by and subject to the control of any of the foregoing.

4

“Intellectual Property” means collectively, the following intangible assets that are owned or used by the Company in connection with the Business:

(i)           all fictitious business names, and any trade names, registered and unregistered trademarks, servicemarks and logos, together with all translations, adaptations, derivations and combinations thereof that are used in connection therewith and including all goodwill associated therewith and any applications or registrations therefor, and renewals in connection therewith (collectively, the “Marks”);

(ii)           all patents and patent applications and patent disclosures, together with all reissuances, continuations (in whole or in part), revisions and reexaminations thereof (collectively, the “Patents”);

(iii)           all copyrights in both published works and unpublished works that are material to the conducting of the Business and all applications, renewals and registrations thereof (collectively, the “Copyrights”);

(iv)           all inventions (whether or not patentable), all proprietary rights and business information (including, but not limited to, ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer/subscriber lists, supplier lists, pricing and cost information, and business and marketing plans and proposals) (collectively, “Trade Secrets”); and

(v)           all computer software and databases (including data and related documentation) other than “off-the-shelf” software (“Software”).

“Knowledge of Superior” means the actual knowledge of any of the Superior Members or the Superior Manager.

“Knowledge of Pacific” means the actual knowledge of any of the executive officers of Pacific.

“Law” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body.

“Liability” means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential and whether due or to become due), including any liability for Taxes.

“Lien” means any mortgage, pledge, lien, security interest, charge, claim, equitable interest, encumbrance, restriction on transfer, conditional sale or other title retention device or arrangement (including a capital lease), deposit arrangement, collateral assignment, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom; provided, however, that the term “Lien” shall not include statutory liens for Taxes to the extent that the payment thereof is not in arrears or otherwise due.

5

“Material Adverse Effect” means any event or events or any change in or effect on the Parties’ financial condition, business, operations, assets, properties, or results of operations that, when taken as a whole, (i) has materially interfered or is reasonably likely to materially interfere with the ongoing operations of the Parties’ business or (ii) singly or in the aggregate has resulted in, or is reasonably likely to have, a material adverse effect on the ongoing conduct of the business of the Parties; provided, however, that any adverse effect arising out of or resulting from (x) an event or series of events or circumstances affecting the United States economy generally or the economy generally of any other country in which the Parties operate or (y) the entering into of this Agreement and the consummation of the transactions contemplated thereby, shall be excluded in determining whether a Material Adverse Effect has occurred.

“Membership Interest(s)” means any equity ownership interest in Superior held by any person or entity.

“Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

“Person” means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a Governmental Body (or any department, agency, or political subdivision thereof).

“Pacific” has the meaning set forth in the introductory paragraph of this Agreement.

“Pacific Financial Statements” means the audited financial statements of Pacific as of and for the years ended December 31, 2008 and December 31, 2007, and the unaudited financial statements as of and for the three month period ended March 31, 2009.

“Pacific SEC Documents” has the meaning set forth in Section 5.18.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Signature Page” has the meaning set forth in the introductory paragraph of this Agreement

“Superior” has the meaning set forth in the introductory paragraph of this Agreement.

“Superior Members” has the meaning set forth in the introductory paragraph of this Agreement.

“Superior Membership Interest” has the meaning set forth in the Recitals of this Agreement.

“Superior Financial Statements” means the audited financial statements of Superior as of and for the years ended December 31, 2008 and December 31, 2007 and the unaudited financial statements as of and for the three month period ended March 31, 2009.

6

“Subsidiary” means with respect to any Person, (i) any corporation at least a majority of whose outstanding voting stock is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; (ii) any general partnership, joint venture or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner.  For the purposes of this definition, “voting stock” means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code § 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

“Tax Return” shall mean any return, filing, questionnaire, information return, election or other document required or permitted to be filed, including requests for extensions of time, filings made with respect to estimated tax payments, claims for refund and amended returns that may be filed, for any period with any Tax authority (whether domestic or foreign) in connection with any Tax (whether or not a payment is required to be made with respect to such filing), including any schedule or attachment thereto and any amendment thereof.

“Transaction” means the Exchange and other actions described in Section 1.4 of this Agreement

ARTICLE III

REPRESENTATIONS AND WARRANTIES

OF THE SUPERIOR MEMBERS

Each Superior Member hereby represents and warrants to Pacific as follows:

3.1           Ownership of the Superior Membership Interests.  Such Superior Member owns, beneficially and of record, good and marketable title to the Superior Membership Interests as set forth adjacent to such Superior Member’s name on the Signature Page free and clear of all Liens, adverse claims, proxies, options or stockholders' agreements. Each Superior Member represents that he or she has no right or claims whatsoever to any Superior Membership Interest, other than as listed on Superior’s records and does not have any options, warrants or any other instruments entitling such Superior Member to exercise to purchase any Superior Membership Interest.  At the Closing, the Superior Members will convey to Pacific good and marketable title to the Superior Membership Interests, free and clear of any Liens, security interests, liens, adverse claims, encumbrances, equities, proxies, options, stockholders' agreements or restrictions.

3.2           Authority Relative to this Agreement.  This Agreement has been duly and validly executed and delivered by such Superior Member and constitutes a valid and binding agreement of such Superior Member, enforceable against such Superior Member in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity.

7

3.3           Investment.  Such Superior Member (a) is acquiring the Exchange Shares solely for his/her/its own account for investment purposes, and not with a view to the distribution thereof, (b) is a sophisticated investor with knowledge and experience in business and financial matters, (c) has received certain information concerning Pacific and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Exchange Shares, and (d) is able to bear the economic risk of acquiring the Exchange Shares pursuant to the terms of this Agreement, including a complete loss of his/her/its investment in the Exchange Shares.  If the Exchange Shares are not registered at the Closing Time, the certificates evidencing the Exchange Shares shall bear a restrictive legend indicating such Exchange Shares have been issued in a non-registered transaction and restricted securities as that term is defined in Rule 144 promulgated under the Securities Act.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

OF THE SUPERIOR AND THE SUPERIOR MEMBERS

Superior and each of the Superior Members, hereby represents and warrants as follows, which warranties and representations shall also be true as of the Closing except as set forth in the disclosure schedule attached to this Agreement (the Superior “Disclosure Schedule”). The Superior Disclosure Schedule is arranged in paragraphs corresponding to the numbered paragraphs contained in this Article IV.

4.1           Authorization of Transaction.  Superior has the power to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Members and Manager of Superior. This Agreement has been duly executed and delivered by Superior and constitutes a legal, valid and binding obligation of Superior, enforceable against Superior in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency or other laws affecting creditor’s rights generally or by legal principles of general applicability governing the availability of equitable remedies.

4.2           Financial Statements.  Attached hereto as Schedule 4.2 is a true and complete copy of the Superior Financial Statements.  The Superior Financial Statements fairly present, in all material respects, the financial condition of Superior as of the date thereof and the results of its operations for the periods then ended.  Other than as set forth herein or in Schedule 4.2, there are no material Liabilities (including, but not limited to, tax liabilities), obligations or claims (whether such Liabilities or claims are contingent or absolute, direct or indirect, and matured or unmatured) not disclosed or referenced in Superior Financial Statements or in any exhibit thereto or notes thereto other than contracts or obligations occurring in the ordinary course of business since March 31, 2009; and no such contracts or obligations occurring in the ordinary course of business constitute Liens or other Liabilities which materially alter the financial condition of Superior as reflected in the Superior Financial Statements.  The Superior Financial Statements have been prepared in accordance with generally accepted accounting principles (except as may be indicated therein or in the notes thereto and except for the absence of footnotes, in the case of unaudited financial statements).

4.3           No Adverse Changes.  Except as set forth on Schedule 4.3, since March 31, 2009, there has not been any material, adverse change in the condition of Superior (financial or otherwise).

8

4.4           No Litigation or Proceeding.  Superior is not a party to, or the subject of, any pending litigation, claims, or governmental investigation or proceeding not reflected in Superior Financial Statements, and to the Knowledge of Superior there are no lawsuits, claims, assessments, investigations, or similar matters, threatened or contemplated against or affecting Superior or the management or properties of Superior.

4.5           Organization. Superior has been duly organized as a limited liability company and is validly existing and in good standing under the laws of the State of Florida, and has the power to own, lease and operate its property and to carry on its business as now being conducted and is duly qualified to do business and in good standing to do business in any jurisdiction where so required except where the failure to so qualify would have no Material Adverse Effect on Superior.  The Articles of Organization of Superior as amended, and the Operating Agreement of Superior as amended, are set forth on Schedule 4.5 attached hereto.

4.6           Taxes.  Superior has filed all Tax Returns which are due or required to be filed by it prior to the date hereof and have paid or made adequate provision in Superior Financial Statements for the payment of all Taxes, fees, or assessments which has or may become due pursuant to such returns, filings or reports or pursuant to any assessments received. Superior is not delinquent or obligated for any Tax, penalty, interest, delinquency or charge and there are no tax liens or encumbrances applicable to it.

4.7           Capitalization.  Superior is a limited liability company formed under the laws of the State of Florida. A description of the outstanding Superior Membership Interests is set forth on Schedule 4.7 attached hereto.  All outstanding Superior Membership Interests are, and shall be at Closing, validly issued, fully paid and nonassessable.  There are no voting trusts, proxies or other agreements, commitments or understandings of any character to which Superior is a party or by which Superior is bound with respect to the voting of any Superior Membership Interest.  There are no outstanding obligations to repurchase, redeem or otherwise acquire any Superior Membership Interest.

4.8           Contracts. Except as set forth on Schedule 4.8, Superior does not have any material contracts, leases, arrangements or commitments (whether oral or written). Superior is not a party to or bound by or affected by any contract, lease, arrangement or commitment (whether oral or written) relating to: (a) the employment of any person; (b) collective bargaining with, or any representation of any employees by, any labor union or association; (c) the acquisition of services, supplies, equipment or other personal property; (d) the purchase or sale of real property; (e) distribution, agency or construction; (f) lease of real or personal property as lessor or lessee or sublessor or sublessee; (g) lending or advancing of funds; (h) borrowing of funds or receipt of credit; (i) incurring any obligation or liability; or (j) the sale of personal property.

4.9           No Breaches of Contracts. Superior has not materially breached any material agreement to which it is a party.

4.10           Intellectual Property.  Superior owns or has the right to use pursuant to license, sublicense, agreement, or permission all Intellectual Property necessary or desirable for the operation of the business of Superior as presently conducted.  Each item of Intellectual Property owned or used by Superior immediately prior to the Closing will be owned or available for use by Superior on identical terms and conditions immediately subsequent to the Closing.  Superior has taken all necessary action to maintain and protect each item of Intellectual Property that it owns or uses. Superior has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties.

9

Schedule 4.10 identifies each patent or registration which has been issued to Superior with respect to any of its Intellectual Property, identifies each pending patent application or application for registration which Superior has made with respect to any of its Intellectual Property, and identifies each license, agreement, or other permission which Superior has granted to any third party with respect to any of its Intellectual Property (together with any exceptions).  With respect to each item of Intellectual Property required to be identified in Schedule 4.10:

(a)           Superior possesses all right, title, and interest in and to the item, free and clear of any lien, charge, encumbrance, license or other restriction;

(b)           the item is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge;

(c)           no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or is threatened which challenges the legality, validity, enforceability, use, or ownership of the item; and

(d)           Schedule 4.10 identifies each item of Intellectual Property that any third party owns and that Superior uses pursuant to license, sublicense, agreement, or permission.  With respect to each item of Intellectual Property required to be identified in Schedule 4.10:

(i)           the license, sublicense, agreement, or permission covering the item is legal, valid, binding, enforceable, and in full force and effect;

(ii)           the license, sublicense, agreement, or permission will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby;

(iii)           no party to the license, sublicense, agreement, or permission is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration thereunder;

(iv)           no party to the license, sublicense, agreement, or permission has repudiated any provision thereof;

(v)           with respect to each sublicense, the representations and warranties set forth in subsections (i) through (iv) above are true and correct with respect to the underlying license;

(vi)           the underlying item of Intellectual Property is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; and

(vii)           no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or is threatened which challenges the legality, validity, or enforceability of the underlying item of Intellectual Property.

4.11           Questionable Payments. Neither Superior, nor any employee, agent or representative of Superior has, directly or indirectly, made any bribes, kickbacks, illegal payments or illegal political contributions using Superior funds or made any payments from Superior’s funds to governmental officials for improper purposes or made any illegal payments from Superior’s funds to obtain or retain business.

10

4.12           Title to Assets.  Superior has good and marketable title to, or a valid leasehold interest in, the properties and assets used by it located on its premises, or shown on the most recent balance sheet included in Superior’s Financial Statements or acquired after the date thereof, free and clear of any liens, charges or encumbrances, except for properties and assets disposed of in the ordinary course of business since the date of the such most recent balance sheet.

4.13           No Subsidiaries. Superior has no Subsidiary.

4.14           Books and Records.  The financial records, minute books, and other documents and records of Superior have been or will be made available to Pacific prior to the Closing.

4.15           Consents and Non-Contravention.  The execution and delivery by Superior of this Agreement and the closing documents and the consummation by Superior of the Transaction do not and will not (i) require the consent, approval or action of, or any filing or notice to, any corporation, firm, person or other entity or any public, governmental or judicial authority (except for such consents, approvals, actions, filing or notices the failure of which to make or obtain will not in the aggregate have a material adverse effect); (ii) violate any order, writ, injunction, decree, judgment, ruling, law, rule or regulation of any Governmental Body applicable to Superior, or its business or assets; (iii) constitute a material breach of any agreement, indenture, mortgage, license or other instrument or document to which Superior, is a party or to which any of them is otherwise subject; and (iv) violate or conflict with any provision of the Articles of Organization or Operating Agreement of Superior.  Superior is not subject to, or a party to, any mortgage, lien, lease, agreement, contract, instrument, order, judgment or decree or any other material restriction of any kind or character which would prevent, hinder, restrict or impair the continued operation of the business of Superior after the Closing.

4.16           Compliance with Securities Laws. Superior has complied with all of the provisions relating to the issuance of securities, and for the registration thereof, under the Securities Act, other applicable securities laws, and all applicable blue sky laws in connection with any and all of its Membership Interest issuances. There are no outstanding, pending or threatened stop orders or other actions or investigations relating thereto involving federal and state securities laws. All issued and outstanding shares of Superior’s Membership Interests were offered and sold in compliance with federal and state securities laws and were not offered, sold or issued in violation of any preemptive right, right of first refusal or right of first offer and are not subject to any right of rescission.

4.17           Legal Compliance.  To the knowledge of Superior, it is and has been, in compliance with, and has conducted any business previously owned or operated by it in compliance with, all applicable laws, orders, rules and regulations of all governmental bodies and agencies, including applicable securities laws and regulations and environmental laws and regulations, except where such noncompliance has and will have, in the aggregate, no material adverse effect. Superior has not received notice of any noncompliance with the foregoing, nor does it have knowledge of any claims or threatened claims in connection therewith. Without limiting the foregoing, to the knowledge of Superior, (i) Superior and any other person or entity for whose conduct Superior is legally held responsible are and have been in compliance with all applicable federal, state, regional, and local laws, statutes, ordinances, judgments, rulings and regulations relating to any matters of pollution, protection of the environment, health or safety, or environmental regulation or control, and (ii) neither Superior nor any other person for whose conduct Superior is legally held responsible has manufactured, generated, treated, stored, handled, processed, released, transported or disposed of any hazardous substance on, under, from or at any of Superior’s properties or in connection with Superior’s operations. There is no pending or, to the knowledge of Superior, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding or investigation, inquiry or information request by any Governmental Body or other entity relating to any environmental law involving Superior.

11

4.18           Undisclosed Liabilities  Superior has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including any liability for Taxes), except for (i) liabilities set forth in the Superior March 31, 2009 financial statements (ii) liabilities set forth in Schedule 4.18, and (iii) of liabilities that have arisen after the most recent fiscal month end in the Ordinary Course of Business and Liabilities incurred in connection with the transactions contemplated by this Agreement.

4.19           Certain Business Relationships With Superior.  Except as disclosed in the Superior Financial Statements or as set forth in Schedule 4.19, none of the Superior Member’s nor any member of such Superior Member’s family has been involved in any material business arrangement or relationship with Superior within the past twelve (12) months, and none of the Superior Member’s nor any member of such Superior Member’s family owns any material asset, tangible or intangible, that is used in the business of Superior.

4.20           Employee and Consultants.  Superior has provided to Pacific an accurate and complete list of all of its current employees, consultants or independent contractors.  Superior is not a party to or bound by any employment agreement or any union contract, collective bargaining agreement or similar contract or agreement, or any other contract or agreement to provide severance payments or benefits to any employee upon termination of employment.

4.21           Permits and Licenses. Superior holds all of the material permits, licenses, certificates or other authorizations of foreign, federal, state or local governmental agencies required for the conduct of its business as presently conducted except where the failure to obtain such permits, licenses, certificates or other authorization would have no Material Adverse Effect on Superior.

     4.22           No Disagreements With lawyers or Accountants. There are no disagreements of any kind presently existing, or reasonably anticipated by Superior to arise, between the accountants and lawyers formerly or presently employed by Superior.

     4.23           Broker's Fees. Neither Superior, nor anyone on its behalf, has any liability to any broker, finder, investment banker or agent, or has agreed to pay any brokerage fees, finder’s fees or commissions, or to reimburse any expenses of any broker, finder, investment banker or agent in connection with this Agreement.

     4.24           Representations and Warranties. No representation or warranty by Superior contained in this Agreement and no statement contained in any certificate, schedule or other communication furnished pursuant to or in connection with the provisions hereof contains or shall contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There is no current or prior event or condition of any kind or character pertaining to Superior that may reasonably be expected to have a material adverse effect on Superior. Except as specifically indicated elsewhere in this Agreement, all documents delivered by Superior in connection herewith have been and will be complete originals, or exact copies thereof.

12

ARTICLE V

REPRESENTATIONS AND WARRANTIES

OF PACIFIC

Pacific hereby represents and warrants as follows, which warranties and representations shall also be true as of the Closing except as set forth in the disclosure schedule attached to this Agreement (the “Pacific Disclosure Schedule”). The Pacific Disclosure Schedule is arranged in paragraphs corresponding to the numbered paragraphs contained in this Article 5.

5.1           Delivery of Pacific Exchange Shares to Superior Members. As of the Closing, the Exchange Shares to be issued and delivered to the Superior Members in the Exchange will, when so issued and delivered, constitute duly authorized, validly and legally issued, fully-paid, nonassessable shares of Pacific common stock, will not be issued in violation of any preemptive or similar rights, will be issued free and clear of all Liens.

5.2           Authorization of Transaction. Pacific has the corporate power to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the consummation of the Transaction have been duly authorized by the Board of Directors of Pacific.  This Agreement has been duly executed and delivered by Pacific and constitutes a legal, valid and binding obligation of Pacific, enforceable against Pacific in accordance with its terms except as enforcement may be limited by applicable bankruptcy, insolvency or other laws affecting creditor’s rights generally or by legal principles of general applicability governing the availability of equitable remedies.

5.3           Financial Statements. Pacific has made available to Superior and the Superior Members through the SEC’s EDGAR System, a true and complete copy of the Pacific Financial Statements.  The Pacific Financial Statements fairly present, in all material respects, the financial condition of Pacific as of the date thereof and the results of its operations for the periods then ended.  Other than as set forth herein or in Schedule 5.3 there are no material Liabilities (including, but not limited to, tax liabilities), obligations or claims (whether such liabilities or claims are contingent or absolute, direct or indirect, and matured or unmatured) not disclosed or referenced in Pacific Financial Statements or in any exhibit thereto or notes thereto other than contracts or obligations occurring in the ordinary course of business since March 31, 2009; and no such contracts or obligations occurring in the ordinary course of business constitute liens or other liabilities which materially alter the financial condition of Pacific as reflected in Pacific Financial Statements.  Pacific Financial Statements have been prepared in accordance with generally accepted accounting principles (except as may be indicated therein or in the notes thereto and except for the absence of footnotes, in the case of unaudited financial statements).

5.4           No Adverse Changes. Except as set forth on Schedule 5.4, since March 31, 2009, there has not been any material adverse change in the condition of the Pacific (financial or otherwise).

5.5           No Litigation or Proceeding.  Pacific is not a party to, or the subject of, any pending litigation, claims, or governmental investigation or proceeding not reflected in Pacific Financial Statements, and to the Knowledge of Pacific there are no lawsuits, claims, assessments, investigations, or similar matters, threatened or contemplated against or affecting Pacific or the management or properties of Pacific.

5.6           Organization.  Pacific is duly organized, validly existing and in good standing under the laws of the State of Delaware; has the corporate power to own, lease and operate its property and to carry on its business as now being conducted and is duly qualified to do business and in good standing to do business in any jurisdiction where so required except where the failure to so qualify would have no material adverse effect on Pacific.

13

5.7           Taxes.  Except as set forth in Schedule 5.7, Pacific has filed all Tax Returns, which are due or required to be filed by it prior to the date hereof and have paid or made adequate provision in the Pacific Financial Statements for the payment of all Taxes, fees, or assessments which have or may become due pursuant to such returns, filings or reports or pursuant to any assessments received. Pacific is not delinquent or obligated for any Tax, penalty, interest, delinquency or charge and there are no Tax liens or encumbrances applicable to it.

5.8           Capitalization.  As of the date of this Agreement, Pacific’s authorized capital stock consists of (i) 100,000,000 shares of Common Stock, $0.001 par value per share (the “Pacific Common Stock”), of which 37,382,000 shares of Pacific Common Stock are issued and outstanding; and (ii) 5,000,000 shares of Preferred Stock, $0.001 par value per share (the “Pacific Common Stock”), of which no shares of are issued and outstanding  All outstanding shares of capital stock of Pacific are, and shall be at Closing, validly issued, fully paid and nonassessable.  Except as described in Schedule 5.8, there are no existing options, convertible or exchangeable securities, calls, claims, warrants, preemptive rights, registration rights or commitments of any character relating to the issued or unissued capital stock or other securities of Pacific.  There are no voting trusts, proxies or other agreements, commitments or understandings of any character to which Pacific is a party or by which Pacific is bound with respect to the voting of any capital stock of Pacific.  Except as set forth on Schedule 5.8, there are no outstanding stock appreciation rights, phantom stock or similar rights with respect to any capital stock of Pacific. There are no outstanding obligations to repurchase, redeem or otherwise acquire any shares of capital stock of Pacific.

The capitalization of Pacific immediately following the Closing is set forth on schedule 5.8.  At the time of Closing, the Superior Members will own not less than 80% of the total Pacific Common Stock Equivalents issued and outstanding.

5.9           Contracts. Except as set forth on Schedule 5.9, Pacific does not have any material contracts, leases, arrangements or commitments (whether oral or written). Pacific is not a party to or bound by or affected by any contract, lease, arrangement or commitment (whether oral or written) relating to: (a) the employment of any person; (b) collective bargaining with, or any representation of any employees by, any labor union or association; (c) the acquisition of services, supplies, equipment or other personal property; (d) the purchase or sale of real property; (e) distribution, agency or construction; (f) lease of real or personal property as lessor or lessee or sublessor or sublessee; (g) lending or advancing of funds; (h) borrowing of funds or receipt of credit; (i) incurring any obligation or liability; or (j) the sale of personal property.

5.10           No Breaches of Contracts. Pacific has not materially breached any material agreement to which it is a party.

5.11           Books and Records. The financial records, minute books, and other documents and records of Pacific have been or will be made available to Superior prior to the Closing.

5.12           Intellectual Property.  Except for off-the-shelf software, Pacific owns no license, sublicense, agreement, or Intellectual Property.

5.13           Questionable Payments. Neither Pacific, nor any employee, agent or representative of Pacific has, directly or indirectly, made any bribes, kickbacks, illegal payments or illegal political contributions using Pacific funds or made any payments from Pacific’s funds to governmental officials for improper purposes or made any illegal payments from Pacific’s funds to obtain or retain business.

14

5.14           Title to Assets.  Pacific has good and marketable title to, or a valid leasehold interest in, the properties and assets used by it located on its premises, or shown on the most recent balance sheet included in Pacific’s Financial Statements or acquired after the date thereof, free and clear of any liens, charges or encumbrances, except for properties and assets disposed of in the ordinary course of business since the date of the such most recent balance sheet.

5.15           Subsidiaries.  Pacific has no subsidiaries.

5.16           Compliance with Securities Laws. To the best of its knowledge, except as set forth on Schedule 5.16, Pacific has complied with all of the provisions relating to the issuance of securities, and for the registration thereof, under the Securities Act, other applicable securities laws, and all applicable blue sky laws in connection with any and all of its stock issuances. There are no outstanding, pending or threatened stop orders or other actions or investigations relating thereto involving federal and state securities laws. All issued and outstanding shares of Pacific’s capital stock were offered and sold in compliance with federal and state securities laws and were not offered, sold or issued in violation of any preemptive right, right of first refusal or right of first offer and are not subject to any right of rescission. All information regarding Pacific which has been provided to Superior by Pacific or set forth in any document or other communication, disseminated to any former, existing or potential shareholders of Pacific or to the public or filed with the NASD, the SEC or any state securities regulators or authorities is true, complete, accurate in all material respects, not misleading, and was and is in full compliance with all securities laws and regulations.

5.17           Legal Compliance. Except as described in Schedules 5.16 and 5.17, to the knowledge of Pacific, it is and has been, in compliance with, and Pacific has conducted any business previously owned or operated by it in compliance with, all applicable laws, orders, rules and regulations of all governmental bodies and agencies, including applicable securities laws and regulations and environmental laws and regulations, except where such noncompliance has and will have, in the aggregate, no material adverse effect. Pacific has not received notice of any noncompliance with the foregoing, nor does it have knowledge of any claims or threatened claims in connection therewith. Pacific has never conducted any operations or engaged in any business transactions whatsoever other than as set forth in the reports Pacific has previously filed with the SEC.   Without limiting the foregoing, to the knowledge of Pacific, (i) Pacific and any other person or entity for whose conduct Pacific is legally held responsible are and have been in compliance with all applicable federal, state, regional, and local laws, statutes, ordinances, judgments, rulings and regulations relating to any matters of pollution, protection of the environment, health or safety, or environmental regulation or control, and (ii) neither Pacific nor any other person for whose conduct Pacific is legally held responsible has manufactured, generated, treated, stored, handled, processed, released, transported or disposed of any hazardous substance on, under, from or at any of Pacific’s properties or in connection with Pacific’s operations. To the knowledge of Pacific, there is no pending or threatened civil or criminal litigation, written notice of violation, formal administrative proceeding or investigation, inquiry or information request by any Governmental  Body or other entity relating to any environmental law involving Pacific.

5.18           Undisclosed Liabilities  Pacific has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including any liability for Taxes), except for (i) liabilities set forth in the Pacific March 31, 2009 financial statements (ii) liabilities set forth in Section 5.18 of the Disclosure Schedule, and (iii) of liabilities that have arisen after the most recent fiscal month end in the Ordinary Course of Business and Liabilities incurred in connection with the transactions contemplated by this Agreement.

15

5.19           SEC Reports.  Pacific has filed all required documents, reports and schedules with the SEC, the NASD and any applicable state or regional securities regulators or authorities (collectively, the “Pacific SEC Documents”). As of their respective dates, the Pacific SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act, the NASD rules and regulations and state and regional securities laws and  regulations, as the case may be, and, at the respective times they were filed, none of the Pacific SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including, in each case, any notes thereto) of Pacific included in the Pacific SEC Documents complied as to form and substance in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto, were prepared in accordance with generally accepted accounting principles (except as may be indicated therein or in the notes thereto) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly presented in all material respects the financial position of Pacific as of the respective dates thereof and the results of its operations and its cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein).

5.20           No Change of Control Type Payment Obligations.  Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (a) result in any payment (whether severance pay, unemployment compensation or otherwise) becoming due from Pacific to any person or entity, including without limitation any employee, director, officer or affiliate or former employee, director, officer or affiliate of Pacific, (b) increase any benefits otherwise payable to any person or entity, including without limitation any employee, director, officer or affiliate or former employee, director, officer or affiliate of Pacific, or (c) result in the acceleration of the time of payment or vesting of any such benefits.

5.21           Consents.  Assuming the consent of the stockholders of Pacific is obtained, and assuming appropriate filings and mailings are made by Pacific under the Securities Act, the Exchange Act, with the NASD, and with the Secretary of State of Delaware, the execution and delivery by Pacific of this Agreement and the closing documents and the consummation by Pacific of the transactions contemplated hereby do not and will not (i) require the consent, approval or action of, or any filing or notice to, any corporation, firm, person or other entity or any public, governmental or judicial authority (except for such consents, approvals, actions, filing or notices the failure of which to make or obtain will not in the aggregate have a material adverse effect); (ii) violate any order, writ, injunction, decree, judgment, ruling, law, rule or regulation of any Governmental Authority applicable to Pacific, or its business or assets; (iii) constitute a material breach of any agreement, indenture, mortgage, license or other instrument or document to which Pacific, is a party or to which any of them is otherwise subject; and (iv) violate or conflict with any provision of the respective Articles of Incorporation or Certificate of Incorporation or Bylaws of either Pacific.  To the knowledge of officers of Pacific, Pacific is not subject to, or a party to, any mortgage, lien, lease, agreement, contract, instrument, order, judgment or decree or any other material restriction of any kind or character which would prevent, hinder, restrict or impair the continued operation of the business of Pacific after the Closing.

5.22           Employees and Consultants.  Pacific has provided to Superior and accurate and complete list of all of its current employees, consultants or independent contractors.  Pacific is not a party to or bound by any employment agreement or any union contract, collective bargaining agreement or similar contract or agreement, or any other contract or agreement to provide severance payments or benefits to any employee upon termination of employment.  Pacific has no pension, retirement, savings, profit sharing, stock-based, incentive compensation or other similar employee benefit plan.

16

5.23           Compliance with Sarbanes Oxley. Pacific is in compliance with the requirements of the Sarbanes-Oxley Act of 2002 applicable to it as of the date of this Agreement. Pacific maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Pacific has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Pacific and designed such disclosures controls and procedures to ensure that material information relating to Pacific, is made known to the certifying officers by others within Pacific, particularly during the period in which Pacific’s Form 10-K or 10-Q  as the case may be, is being prepared. Pacific’s certifying officers have evaluated the effectiveness of Pacific’s controls and procedures as of the date of its most recently filed periodic report (such date, the “Evaluation Date”). Pacific presented in its most recently filed periodic report the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in Pacific’s internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) or in other factors that could significantly affect Pacific’s internal control over financial reporting. Pacific’s auditors, at all relevant times, have been duly registered in good standing with the Public Company Accounting Oversight Board.

5.24           Permits and Licenses. Pacific holds all of the material permits, licenses, certificates or other authorizations of foreign, federal, state or local governmental agencies required for the conduct of its business as presently conducted, except where the failure to obtain such permits, licenses, certificates, or other authorizations would have no Material Adverse Effect on Pacific.

5.25           No Disagreements With Lawyers or Accountants. There are no disagreements of any kind presently existing, or reasonably anticipated by Pacific to arise, between the accountants and lawyers formerly or presently employed by Pacific.

5.26           No Security Regulatory Investigation. Neither Pacific nor any of its past or present officers or directors is, or ever has been, the subject of any formal or informal inquiry or investigation by the SEC or the NASD.

5.27           Broker's Fees. Neither Pacific, nor anyone on its behalf, has any liability to any broker, finder, investment banker or agent, or has agreed to pay any brokerage fees, finder’s fees or commissions, or to reimburse any expenses of any broker, finder, investment banker or agent in connection with this Agreement.

5.28           Representations and Warranties. No representation or warranty by Pacific contained in this Agreement and no statement contained in any certificate, schedule or other communication furnished pursuant to or in connection with the provisions hereof contains or shall contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There is no current or prior event or condition of any kind or character pertaining to Pacific that may reasonably be expected to have a material adverse effect on Pacific. Except as specifically indicated elsewhere in this Agreement, all documents delivered by Pacific in connection herewith have been and will be complete originals, or exact copies thereof.

17

ARTICLE VI

ACTIONS PRIOR TO CLOSING

6.1           Access.  Prior to the Closing, Superior, the Superior Members and Pacific, shall be entitled to make such investigations of the assets, properties, business and operations of the other party, and to examine the books, records, tax returns, financial statements and other materials of the other party as such investigating party deems necessary in connection with this Agreement and the Transactions. Any such investigation and examination shall be conducted at reasonable times and under reasonable circumstances, and the parties hereto shall cooperate fully therein. Until the Closing, and if the Closing shall not occur, thereafter, each party shall keep confidential and shall not use in any manner inconsistent with the transactions contemplated by this Agreement, and shall not disclose, nor use for their own benefit, any information or documents obtained from the other party concerning the assets, properties, business and operations of such party, unless such information (i) is readily ascertainable from public or published information, (ii) is received from a third party not under any obligation to keep such information confidential, or (iii) is required to be disclosed by any law or order (in which case the disclosing party shall promptly provide notice thereof to the other party in order to enable the other party to seek a protective order or to otherwise prevent such disclosure). If this transaction is not consummated for any reason, each party shall return to the other all such confidential information, including notes and compilations thereof, promptly after the date of such termination. The representations and warranties contained in this Agreement shall not be affected or deemed waived by reason of the fact that either party hereto discovered or should have discovered any representation or warranty is or might be inaccurate in any respect.

6.2           Public Disclosures.  Except as required by law, prior to the Closing, Superior, the Superior Members and Pacific agree not to issue any statement or communications to the public or the press regarding the Transaction without the prior written consent of the other party.  Pacific shall provide Superior with a copy of any document to be filed by Pacific with the SEC regarding this Agreement and/or the Transaction, not less than two days prior to such filing Pacific shall provide Superior with a copy of any press release or other public announcement regarding this Agreement and/or the Transaction not less than two days prior to the distribution of such press release or other public announcement.

6.3           Restrictions on Certain Actions. Prior to the Closing, except as contemplated by this Agreement, there shall be no stock dividend, stock split, recapitalization, or exchange of shares with respect to or rights, options or warrants issued in respect of Pacific Common Stock after the date hereof and there shall be no dividends or other distributions paid on Pacific Common Stock after the date hereof, in each case through and including the Closing.   Prior to the Closing, Pacific shall not take any action or enter into any agreement to issue or sell any shares of capital stock of Pacific or any securities convertible into or exchangeable or exercisable for any shares of capital stock of Pacific or to repurchase, redeem or otherwise acquire any of the issued and outstanding capital stock of Pacific, without the prior written consent of the Superior.

6.4           Filing of SEC Documents.  Prior to the Closing, Pacific will timely file all required Pacific SEC Documents and comply in all material respects with the requirements of the Securities Act, the Exchange Act, the NASD rules and regulations and state and regional securities laws and regulations.

6.5           Conduct of Business.  Prior to the Closing, Pacific shall conduct its business only in the usual and ordinary course and the character of such business shall not be changed nor shall any different business be undertaken.  Prior to the Closing, except as contemplated hereby, Pacific shall not incur any Liabilities without the prior written consent of the Superior, except for Liabilities incurred in the ordinary course of business.

18

ARTICLE VII

CONDITIONS PRECEDENT

7.1           Conditions Precedent to the Obligations of Superior.  All obligations of Superior and Superior Members under this Agreement are subject to the fulfillment, prior to or as of the Closing, of each of the following conditions:

(a)         Superior shall have completed its due diligence review of Pacific, and the results of such review shall be satisfactory to the Superior in its sole discretion.

(b)         The representations and warranties by or on behalf of Pacific contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof or in connection herewith shall be true and correct in all respects at and as of the Closing as though such representations and warranties were made at and as of such time.

(c)         Pacific shall have performed and complied with all covenants, agreements, and conditions set forth or otherwise contemplated in, and shall have executed and delivered all documents required by, this Agreement to be performed or complied with or executed and delivered by them prior to or at the Closing.

(d)         The directors of Pacific shall have approved in accordance with applicable state corporation law the execution and delivery of this Agreement and the consummation of the Transactions.

(e)         On or before the Closing Date, Pacific shall have delivered to Superior certified copies of resolutions of the directors of Pacific approving and authorizing the execution, delivery and performance of this Agreement and authorizing all of the necessary and proper action to enable Pacific to complete the Transaction.

(f)         Pacific shall have sufficient shares of its capital stock authorized to complete the Exchange and the Transaction.

(g)        No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Exchange shall be in effect.

(h)        At Closing, all of the officers of Pacific, except David Knudson as Secretary, shall have resigned in writing and those persons listed on Exhibit 1.4 shall have been elected and/or appointed as officers and directors of Pacific.

(i)         The shares of Exchange Stock to be issued to the Superior Members at Closing will be validly issued, nonassessable and fully paid under Delaware corporation law.

(j)         Superior shall have received all necessary and required approvals and consents from required parties.

(o)       The holders of all outstanding Superior Membership Interests shall have executed the Agreement and exchanged their Superior Membership Interests of Exchange Shares pursuant to this Agreement.

19

7.2           Conditions Precedent to the Obligations of Pacific. All obligations of Pacific under this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions:

(a)           The representations and warranties by Superior contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof shall be true and correct in all material respects at and as of the Closing as though such representations and warranties were made at and as of such times.

(b)           Superior shall have performed and complied with, in all material respects, all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing.

(c)           The holders of all outstanding Superior Membership Interests shall have executed the Agreement and exchanged their Superior Membership Interests of Exchange Shares pursuant to this Agreement.

(d)           No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Exchange shall be in effect.

(e)           All financial statements required by Form 8-K shall have been delivered by Superior to Pacific.

ARTICLE VIII

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

The representations and warranties made by Pacific, Superior and the Superior Members (including the representations and warranties set forth in Articles II, III and IV and the representations and warranties set forth in any certificate delivered at closing by an officer of Pacific and Superior) shall survive the Closing for a period of six months.  For purposes of this Agreement, each statement or other item of information set forth in any Schedule of a party hereto shall be deemed to be a part of the representations and warranties made by such party in this Agreement. In the event of any breach of a representation or warranty prior to the end of the survival period, an aggrieved party shall have such rights as may be available under Utah law.

ARTICLE IX

TERMINATION

9.1           Events of Termination  This Agreement may, by notice given in the manner hereinafter provided, be terminated and abandoned at any time prior to completion of the Closing, as follows:

(a)           by Superior if (1) there has been a material Breach (as defined below) by Pacific and, in the case of a covenant or agreement Breach, such Breach shall not have been cured within ten (10) days after receipt by Pacific of notice specifying particularly such Breach, (2) if Superior determines in its sole discretion as a result of its due diligence review of Pacific that it does not wish to proceed with the Exchange, or (3) if the Closing conditions set forth in Article 7 have not been satisfied by the close of business on July 31, 2009, and Superior is not in material Breach of any provisions of this Agreement;

20

(b)           by Pacific if (1) there has been a material Breach by Superior and, in the case of a covenant or agreement Breach, such Breach shall not have been cured within ten (10) days after receipt by Superior of notice specifying particularly such Breach, (2) if Pacific determines in its sole discretion as a result of its due diligence review of Superior that it does not wish to proceed with the Exchange, or (3) if the Closing conditions set forth in Article 7 have not been satisfied by the close of business on July 31, 2009 and Pacific is not in material Breach of any provision of this Agreement;

(c)           by mutual agreement of Superior and Pacific.

This Agreement may not be terminated after completion of the Closing.  There shall be deemed to be a “Breach” of a representation, warranty, covenant, obligation, or other provision of this Agreement if there is or has been (a) any inaccuracy (subject to applicable knowledge and materiality qualifiers, if any) in, or breach of, or any failure to comply with, or perform, such representation, warranty, covenant, obligation, or other provision, or (b) any claim (by any Person) or other circumstance that is inconsistent with such representation, warranty, covenant, obligation, or other provision; and the term “Breach” shall be deemed to refer to any such inaccuracy, breach, failure, claim, or circumstance.

ARTICLE X

DOCUMENTS AT CLOSING

At the Closing, the following documents shall be delivered:

(a)           Superior will deliver, or will cause to be delivered, to Pacific the following:

(i)           a certificate executed by the President or Manager of Superior to the effect that all representations and warranties made by the Superior under this Agreement are true and correct as of the Closing, the same as though originally given to Pacific on said date;

(ii)           a certificate from the State of Florida dated within five business days of the Closing to the effect that the Superior is in good standing under the laws of Florida;

(iii)           such other instruments, documents and certificates, if any, as are required to be delivered pursuant to the provisions of this Agreement;

(iv)           a general Release signed by each of the Superior Members;

(v)           certified copies of resolutions adopted by the Manager of the Superior authorizing the Transaction;  and

(vi)           all other items, the delivery of which is a condition precedent to the obligations of Pacific, as set forth herein.

(b)           Pacific will deliver or cause to be delivered to Superior:

(i)           stock certificates representing those securities of Superior to be issued in the Exchange as described in Section 7 hereof;

21

(ii)           a certificate of the President of Pacific, respectively, to the effect that all representations and warranties of Pacific made under this Agreement are true and correct as of the Closing, the same as though originally given to the Superior on said date;

(iii)           certified copies of resolutions adopted by the Board of Directors of Pacific authorizing the Transaction and all related matters;

(iv)           certificates from the State of Delaware dated within five business days of the Closing Date that Pacific is in good standing under the laws of said state;

(vi)           such other instruments and documents as are required to be delivered pursuant to the provisions of this Agreement;

(viii)           all other items, the delivery of which is a condition precedent to the obligations of Superior, as set forth in Section 7.1 hereof.

ARTICLE XI

MISCELLANEOUS

11.1           Further Assurances.  At any time, and from time to time, after the Effective Time, each party will execute such additional instruments and take such action as may be reasonably requested by the other party to confirm or perfect title to any property transferred hereunder or otherwise to carry out the intent and purposes of this Agreement.

11.2           Waiver.  Any failure on the part of any party hereto to comply with any of its obligations, agreements or conditions hereunder may be waived in writing by the party (in its sole discretion) to whom such compliance is owed.

11.3           Amendment.  This Agreement may be amended only in writing as agreed to by all parties hereto.

11.4           Nature of Representations.  All of the parties hereto are executing and carrying out the provisions of this Agreement in reliance solely on the representations, warranties and covenants and agreements contained in this Agreement and the other documents delivered at the Closing and not upon any representation warranty, agreement, promise or information, written or oral, made by the other party or any other person other than as specifically set forth herein.

11.5           Notices.  All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given (a) when delivered by hand (with written confirmation of receipt), (b) three (3) days after being deposited in the mails, if sent by certified mail, with return receipt requested, postage and fees prepaid (c) upon confirmed receipt, if sent by facsimile transmission, or (d) one (1) day after sending, if sent by a nationally recognized overnight delivery service (receipt requested) specifying next day delivery, in each case to the appropriate addresses set forth below (or to such other addresses as a party may designate by notice to the other parties):

22

If to Sellers:

Steven Clark

c/o Superior Filtration Products, LC

Building 12A, Bay 5&6

986 West Second Street

Ogden UT, 84404

If to Pacific:

Pacific Alliance Corporation

1661 Lakeview Circle

Ogden, UT  84403

with a copy, which shall not constitute notice, to:

A. O. Headman, Jr., Esq.

Cohne, Rappaport & Segal

257 East 200 South, Suite 700

Salt Lake City, Utah 84111

11.6           Headings.  The section and subsection headings in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

11.7           Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.8           Binding Effect.  This Agreement shall be binding upon the parties hereto and inure to the benefit of the parties, their respective heirs, administrators, executors, successors and assigns.

11.9           Entire Agreement.  This Agreement and the attached Schedules and Exhibits, is the entire agreement of the parties covering everything agreed upon or understood in the transaction. There are no oral promises, conditions, representations, understandings, interpretations or terms of any kind as conditions or inducements to the execution hereof.

11.10         Assignments, Successors, and No Third-Party RightsNone of the parties may assign or otherwise transfer any of their respective rights under this Agreement without the prior consent of the other parties.  Any attempted assignment in contravention of the foregoing restrictions on assignment or transfer shall be null and void.  Subject to the two preceding sentences, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors, permitted assigns, heirs, executors, and personal representatives of the parties.  Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.

11.10         Time.  Time is of the essence in the performance of this Agreement.

11.11        Severability.  If any part of this Agreement is deemed to be unenforceable, the balance of the Agreement shall remain in full force and effect.

23

11.12         Responsibility and Costs.  Whether the Transaction is consummated or not, all fees, expenses and out-of-pocket costs, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred by the parties hereto shall be borne solely and entirely by the party that has incurred such costs and expenses, unless the failure to consummate the Transaction constitutes a breach of the terms hereof, in which event the breaching party shall be responsible for all costs of all parties hereto.

11.13        Inapplicability of Indemnification Provisions.  The provisions contained in Superior’s Articles of Organization and/or Operating Agreement for indemnifying officers and directors of that company shall not apply to the representations and warranties made herein by each Member or the manger or officers of Superior.

11.14        Applicable Law.  This Agreement shall be construed and governed by the internal laws of the State of Utah.

11.16        Jurisdiction and Venue.  Each party hereto irrevocably consents to the jurisdiction and venue of the state or federal courts located in Salt Lake County, State of Utah, in connection with any action, suit, proceeding or claim to enforce the provisions of this Agreement, to recover damages for breach of or default under this Agreement, or otherwise arising under or by reason of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

SUPERIOR FILTRATION PRODUCTS, LLC,

a Florida limited liability company

By:  /s/                                                                                                                                  

Name: Steven Clark

Title:  Manager

PACIFIC ALLIANCE CORPORATION,

a Delaware corporation

By:   /s/                                                                                                                                   

Name:  Mark A. Scharmann

24

Percentage Membership                                                      Pacific Series A

Interest	Preferred Shares	SUPERIOR MEMBERS
86.317 %	863,172	/s/                                                                                                                                       Jan Clark
5.770 %	57,699	/s/                                                                                                                                      Steve Clark
4.121 %	41,214	/s/                                                                                                                                      Randall Menscer
3.627 %	36,268	/s/                                                                                                                                      Kirk Ferguson
.165 %	1,649	/s/                                                                                 Darrell Cossey

25

EX-3.1

Exhibit 3.1

Pacific Alliance Corporation

Form 8-K

File No. 000-51777

PACIFIC ALLIANCE CORPORATION

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES A CONVERTIBLE PREFERRED STOCK

Pursuant to Section 151 of the General Corporation Law of

the State of Delaware

The undersigned, Mark A. Scharmann, does hereby certify that:

1.           He is the President of Pacific Alliance Corporation, a Delaware corporation (the “Corporation”).

2.           The Corporation is authorized to issue 5,000,000 shares of preferred stock, none of which have been issued.

3.           The following resolutions were duly adopted by the Board of Directors:

WHEREAS, the Certificate of Incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, comprised of 5,000,000 shares, $0.001 par value per share, issuable from time to time in one or more series;

WHEREAS, the Board of Directors of the Corporation is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them;

WHEREAS, the Corporation has entered into an Exchange Agreement (“Exchange Agreement”) pursuant to which the Corporation has agreed to issue shares of its preferred stock, designated as Series A Convertible Preferred Stock; and

WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Exchange Agreement, up to 1,000,000 shares of the preferred stock which the Corporation has the authority to issue, as follows:

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:

TERMS OF PREFERRED STOCK

Section 1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Exchange Agreement shall have the meanings given such terms in the Purchase Agreement. For the purposes hereof, the following terms shall have the following meanings:

“Common Stock” means the Corporation’s common stock, par value $0.001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.

“Common Stock Equivalents” means any securities of Pacific which would entitle the holder thereof to acquire at any time any Pacific common stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, common stock.

“Conversion Date” shall have the meaning set forth in Section 6(c)(i).

“Conversion Ratio” shall have the meaning set forth in Section 6(a).

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock in accordance with the terms hereof.

“Exchange Agreement” means the Exchange Agreement, dated as of the Original Issuance Date, to which the Corporation and the original Holders are parties, as amended, modified or supplemented from time to time in accordance with its terms.

“Holder” shall have the meaning given such term in Section 2.

“Junior Securities” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior or pari passu to the Series A Preferred Stock in dividend rights or liquidation preference.

“Liquidation” shall have the meaning set forth in Section 5.

“Utah Courts” shall have the meaning set forth in Section 11(b).

“Notice of Conversion” shall have the meaning set forth in Section 6(a).

“Original Issuance Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock.

“Series A Preferred Stock” shall have the meaning set forth in Section 2.

“Series A Directors” has the meaning set forth in Section 9.

“Transaction Documents” shall be the Exchange Agreement and any and all documents delivered pursuant to the Exchange Agreement.

2

Section 2. Designation, Amount, Par Value and Rank. The series of preferred stock shall be designated as “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”) and the number of shares so designated shall be up to 1,000,000 (which shall not be subject to increase without the written consent of all of the Holders of the Series A Preferred Stock (each, a “Holder” and collectively, the “Holders”)). The Series A Preferred Stock shall rank prior to the common stock, par value $.001 per share (the “Common Stock”), and to all other classes and series of equity securities of the Company which by its terms does not rank on a parity with or senior to the Series A Preferred Stock (“Junior Stock”).  The Series A Preferred Stock shall be subordinate to and rank junior to all indebtedness of the Company now or hereafter outstanding.

Section 3. Dividends.  No dividends shall accrue on the Series A Preferred Stock until after the first anniversary of the Original Issuance Date.  Thereafter, the Series A Preferred Stock shall be entitled to dividends pari passu with the Corporation’s Common Stock as though the Series A Preferred Stock had been converted into Common Stock.

Section 4. Voting Rights.   Each Holder of Series A Preferred Stock shall be entitled to the number of votes equal to the number of whole shares of Common Stock into which the shares of Series A Preferred Stock held by such Holder are convertible on the record date for the vote on such matter (as adjusted from time to time pursuant to Section 6 hereof and except for the election of directors other than the Series A Directors) as of the record date, at each meeting of stockholders of the Corporation (and written actions of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration. Holders of Series A Preferred Stock shall be entitled to notice of any meeting of stockholders and, except as otherwise provided herein or otherwise required by law, to vote together with the holders of Common Stock as a single class.

Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders of the Series A preferred Stock shall not be entitled to receive any preference and each holder of Series A Preferred Stock shall share ratably with the holders of the Corporation’s common stock as thought the Series A Preferred Stock had been converted into common stock.

Section 6.  Conversion.   Conversion. The Holders of the Series A Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

(a)           Right to Convert.   From and after December 1, 2009, each share of Series A Preferred Stock shall be convertible, at the option of the Holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into 606.60 shares of the Corporation’s common stock (“Conversion Ratio”).  Notwithstanding anything else in this Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock, the Holders have no right to convert his or its shares of Series A Preferred Stock into Common Stock, unless there are a sufficient number of  shares of Common Stock authorized to effect such Conversion.

(b)           Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock. In lieu of any fractional shares to which the Holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price.

(c)           Mechanics of Conversion.

3

(i)            In order for a Holder of Series A Preferred Stock to convert shares of Series A Preferred Stock into shares of Common Stock, such Holder shall surrender the certificate or certificates for such shares of Series A Preferred Stock, at the office of the transfer agent for the Series A Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such Holder elects to convert all or any number of the shares of the Series A Preferred Stock represented by such certificate or certificates. Such notice shall state such Holder’s name or the names of the nominees in which such Holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered Holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date (“Conversion Date”). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such Holder, or to his or its nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share. On the Conversion Date, each Holder of Series A Preferred Stock surrendered for conversion shall be deemed to be the Holder of the Common Stock issuable upon conversion of such Series A Preferred Stock, notwithstanding that the certificates representing such shares of Series A Preferred Stock shall not have been surrendered at the office of the Corporation, that notice from the Corporation shall not have been received by any Holder of record of shares of such Series A Preferred Stock, or that the certificates evidencing such shares of Common Stock shall not then be actually delivered to such Holder.

(ii)            The Corporation shall, not later than December 1, 2009, cause its Certificate of Incorporation to be amended to increase the number of shares of Common Stock authorized to such an amount as shall be necessary to allow for the conversion of all shares of Series A Preferred Stock into shares of Common Stock.

(iii)            Upon any such conversion, no adjustment to the Conversion Price shall be made for any accrued but unpaid dividends on the Series A Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

(iv)            All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the Holders thereof to receive shares of Common Stock in exchange therefor and payment of any dividends accrued but unpaid thereon. Any shares of Series A Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation (without the need for stockholder action) may from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.

(v)            The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series A Preferred Stock pursuant to this Section 6. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series A Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

4

(d)           Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issuance Date effect a subdivision of the outstanding Common Stock or combine the outstanding shares of Series A Preferred Stock, the Conversion Ratio in effect immediately before that subdivision or combination shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Original Issuance Date combine the outstanding shares of Common Stock or effect a subdivision of the outstanding shares of Series A Preferred Stock, the Conversion Ratio in effect immediately before the combination or subdivision shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective.

(e)           Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issuance Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Ratio in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Ratio, as applicable, then in effect by a fraction:

(i)           the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(ii)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions; and provided further, however, that no such adjustment shall be made if the holders of Series A Preferred Stock simultaneously receive (A) a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock on the date of such event or (B) a dividend or other distribution of shares of Series A Preferred Stock which are convertible, as of the date of such event, into such number of shares of Common Stock as is equal to the number of additional shares of Common Stock being issued with respect to each share of Common Stock in such dividend or distribution.

5

(f)           Adjustment for Reclassification, Exchange, or Substitution. If the Common Stock issuable upon the conversion of the Series A Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of Series A Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable, upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series A Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein.

(g)           Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series A Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by paragraphs (e) or (f) and (g) of this Section 6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock shall be convertible into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 6 with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock to the end that the provisions set forth in this Section 6 (including provisions with respect to changes in and other adjustments of the Conversion Ratio, as applicable) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series A Preferred Stock.

(h)           Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Ratio pursuant to this Section 6, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series A Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Series A Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Ratio then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series A Preferred Stock

.

(i)           Notice of Record Date. In the event:

(i)            that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation;

(ii)            that the Corporation subdivides or combines its outstanding shares of Common Stock;

6

(iii)            of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another Corporation, or of the sale of all or substantially all of the assets of the Corporation; or

(iv)            of a Liquidation event; then the Corporation shall cause to be filed at its principal office or at the office of the transfer agent of the Series A Preferred Stock, and shall cause to be mailed to the Holders at their last addresses as shown on the records of the Corporation or such transfer agent, at least ten days prior to the date specified in (A) below or twenty days before the date specified in (B) below, a notice stating:

(A)            the record date of such dividend, distribution, subdivision or combination, 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, distribution, subdivision or combination are to be determined, or

(B)            the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation or winding up is expected to become effective, 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 or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up.

Section 8. No Redemption Rights or Requirements.  The Corporation has no right to redeem the Series A Preferred Stock and a Holder has no right to require the Corporation to redeem the Series A Preferred Stock.

Section 9. Series A Directors, Board of Directors. The Holders shall have the right to the exclusion of all other classes or series of the Corporation’s capital stock, voting at a meeting of stockholders called for the purpose or by written consent, separately from the Common Stock and all other series of preferred stock, to elect two (2) individuals (the “Series A Directors”) to serve on the Board of Directors of the Corporation. Any Series A Director elected pursuant to this Section may be removed at any time without cause by, and only by, the vote, given at a meeting or by written consent of the Holders of Series A Preferred Stock. Any vacancy on the Board of Directors created by the resignation, removal, incapacity or death of any Series A Director elected pursuant to this Section shall only be filled by the remaining Series A Director, if any, or the holders of the Series A Preferred Stock. The Series A Directors shall be entitled to reimbursement from the Corporation for costs and expenses in attending board meetings.

Section 10. Miscellaneous.

(a)           Lost or Mutilated Preferred Stock Certificate.  If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

7

(b)           Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in Salt Lake City, Utah (the “Utah Courts”).

Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Utah Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), 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 such Utah Courts, or such Utah Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents 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 party at the address in effect for notices to it under this Certificate of Designation 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 other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

(c)           Waiver.  Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holder.  The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holders) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation.  Any waiver by the Corporation or a Holder must be in writing.

(d)           Severability.  If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

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

(f)           Status of Converted or Redeemed Preferred Stock.   If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series A  Convertible Preferred Stock

8

RESOLVED, FURTHER, that the president of the Corporation be and he hereby is authorized and directed to prepare and file a Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.

IN WITNESS WHEREOF, this Certificate of Designation has been signed on behalf of the Company by its President on June 24, 2009.

PACIFIC ALLIANCE CORPORATION

By:  ____________________________________

Name:  Mark A. Scharmann

Title:  President

9

ANNEX A

NOTICE OF CONVERSION

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED STOCK)

The undersigned hereby elects to convert the number of shares of  Series A Convertible Preferred Stock indicated below into shares of common stock, par value $0.001 per share (the “Common Stock”), of Pacific Alliance Corporation, a Delaware corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Purchase Agreement. No fee will be charged to a Holder for any conversion, except for any such transfer taxes.

Conversion calculations:

Date to Effect Conversion: _____________________________________________

Number of shares of Preferred Stock owned prior to Conversion: _______________

Number of shares of Preferred Stock to be Converted: ________________________

Stated Value of shares of Preferred Stock to be Converted: ____________________

Number of shares of Common Stock to be Issued: ___________________________

Applicable Conversion Price:____________________________________________

Number of shares of Preferred Stock subsequent to Conversion: ________________

[HOLDER]

By:___________________________________

Name:

Title:

10

EX-4.1

Exhibit 4.1

Pacific Alliance Corporation

Form 8-K

File No. 000-51777

EXECUTION COPY

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR ANY APPLICABLE STATE SECURITIES LAWS.  AS A RESULT, THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR EVIDENCE SATISFACTORY TO THE COMPANY OF AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE ACT OR COMPLIANCE WITH RULE 144 UNDER SUCH ACT.  THE TRANSFER OF THIS WARRANT IS FURTHER RESTRICTED AS PROVIDED HEREIN.

WARRANT TO PURCHASE SHARES

OF COMMON STOCK

OF PACIFIC ALLIANCE CORPORATION

EXERCISABLE ON OR BEFORE, AND VOID AFTER

5:00 P.M. UTAH TIME ON JUNE 30, 2014

This Certifies That Sycamore ventures, LLC, SERIES 1 a Utah limited liability company (the “Holder”), or registered assigns, is entitled to subscribe for and purchase from PACIFIC ALLIANCE CORPORATION, a Delaware corporation (the “Company”), at any time permitted hereunder after July 1, 2009, and through June 30, 2014 (subject to the terms and provisions of this Warrant), up to 500,000 shares of the Company’s common stock at an exercise price of $0.05 per share, subject to adjustment as provided herein (as adjusted, the “Purchase Price”).

The shares that may be acquired upon exercise of this Warrant are referred to herein as the “Warrant Shares.”  As used herein, the term “Holder” means the Holder identified in the paragraph above and any party who acquires all or a part of this Warrant as a registered transferee of such Holder.  The term “Convertible Securities” means any stock or other securities convertible into, or exchangeable for, Company common stock.This Warrant is subject to the following terms and conditions:

1.           Exercise.  The rights represented by this Warrant may be exercised by the Holder, in whole or in part (but not as to a fractional share of common stock), by written Notice of Exercise (in the form attached hereto) delivered to the Company at its principal office prior to the expiration of this Warrant and accompanied or preceded by the surrender of this Warrant, along with a check in payment of the Purchase Pricemultiplied by the number of Warrant Shares being purchased hereunder (unless this Warrant is being exercised pursuant to Section 9 below).  The right to exercise this Warrant shall vest only upon a change in control of the Company, which shall be deemed to occur upon any of the following:  (a) an acquisition by one or more individuals, entities or associations of effective control (whether through legal or beneficial ownership of capital stock, by contract or otherwise) of more than 33% of the voting securities of the Company, or (b) a merger, acquisition or consolidation of the Company or any of its affiliates (specifically including but not limited to a subsidiary), with or into any other entity or association, or the merger or consolidation of any other entity or association with or into the Company or any of its affiliates (specifically including but not limited to a subsidiary).

As used herein, the term “affiliates” shall have the meaning ascribed to such term under the Securities Act of 1933.

2.           Exchange and Replacement.  Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant, the Company will make and deliver a new Warrant oflike tenor, in lieu of this Warrant.  This Warrant shall be promptly canceled by the Company upon the surrender hereof in connection with any exchange or replacement.

3.           Issuance of the Warrant Shares.

(a)           Subject to the provisions of paragraph (b) below, certificates for the Warrant Shares purchased hereunder shall be delivered to the Holder within a reasonable time, not exceeding five business days, after the rights represented by this Warrant shall have been exercised in accordance with the requirements hereof, and, unless this Warranthasexpired, a new Warrant representing the right to purchase the number of WarrantShares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the Holder within such time.

(b)           Notwithstanding the foregoing, the Company shallnot be required to recognize any exercise, or deliver any certificate for Warrant Shares upon attempted exercise, of this Warrant except in accordance with exemptions from the applicable securities, registration requirements or registrations under applicable securities laws.  The Company shall not be obligated to effect a registration of the Warrant Shares under federal or state securities laws unless specifically so provided herein.  The Holder agrees to execute such documents and make such representations, warranties and agreements as may be required solely to comply with the exemptions relied upon by the Company, or the registrations made, for the issuance of the Warrant Shares or their later resale pursuant to a registration statement filed by the Company.

4.           Covenants of the Company.  The Company covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant a sufficient number of shares of common stock to provide for the exercise of the rights represented by this Warrant.

5.           Purchase Price and Warrant Share Adjustments.The provisions of this Warrant are subject to adjustment as provided in this Section 5.

(a)            Subject to paragraph (b) below, in case the Company shall hereafter:  (i) pay any dividends on any class of stock of the Company payable in common stock or Convertible Securities; (ii) subdivide its then-outstanding shares of common stock into a greater number of shares; or (iii) combine outstanding shares of common stock, by reclassification or otherwise; then, in any such event, the Purchase Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (A) the number of shares of common stock outstanding immediately prior to such event, multiplied by the then-existing Purchase Price, by (B) the total number of shares of common stock outstanding immediately after such event (including in each case the maximum number of shares of common stock issuable in respect of any Convertible Securities), and the resulting quotient shall be the adjusted Purchase Price.

2

An adjustment made pursuant to this paragraph shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.  All calculations under this paragraph shall be made to the nearest cent or to the nearest 1/100 of a share, as the case may be.

(b)            In case of any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the surviving corporation, or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), there shall be no adjustment under paragraph (a) above but the Holder of this Warrant then outstanding shall have the right thereafter to convert this Warrant into the kind and amount of shares of stock and other securities,and any other property, which he, she or it would have owned or have been entitled to receive immediately after such consolidation, merger, statutory exchange sale or conveyance had such Warrant been converted immediately prior to the effective date of such consolidation, merger, statutory exchange, sale or conveyance.  The provisions of this paragraph shall similarly apply to successive consolidations, mergers, statutory exchanges, sales or conveyances.

6.           No Voting Rights.  This Warrant by itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

7.           Notice of Transfer of Warrant or Resale of the Warrant Shares.

(a)            By acceptance hereof, the Holder agrees to give written notice to the Company before transferring this Warrant or transferring any Warrant Shares of such Holder’s intention to do so, describing briefly the manner of any proposed transfer.  If in the opinion of counsel to the Company the proposed transfer may be effected without registration or qualification (under any federal and state securities laws), the Company, as promptly as practicable, shall notify the Holder of such opinion, whereupon the Holder shall be entitled to transfer this Warrant or to dispose of Warrant Shares received upon the previous exercise of this Warrant, all in accordance withthe terms of the notice delivered by the Holder to the Company; provided, however, that an appropriate legend may be endorsed on this Warrant or the certificates for such Warrant Shares respecting restrictions upon transfer thereof necessary or advisable in the opinion of counsel and satisfactory to the Company to prevent further transfers which would be in violation of Section 5 of the Securities Act of 1933 (the “Securities Act”) and applicable state securities laws; and provided further that the prospective transferee or purchaser shall execute such documents and make such representations, warranties, and agreements as may be required solely to. comply with the exemptions relied upon by the Company for the transfer of disposition of the Warrant or Warrant Shares.

(b)            If, in the opinion of counsel referred to in this Section 7, the proposed transfer or disposition of this Warrant or such Warrant Shares described in the written notice given pursuant to this Section 7 may not be effected without registration or qualification of this Warrant or such Warrant Shares the Company shall promptly give written notice thereof to the Holder, and the Holder will limit its activities in respect to such transfer or disposition as, in the opinion of both such counsel, are permitted by law.

8.           No Fractional Shares.  No fractional shares will be issued upon the exercise hereof.

3

9.           Net Issue Exercise.  In lieu of exercising this Warrant pursuant to Section 1 hereof, the Holder may elect to receive, without the payment of any additional consideration, a number of Warrant Shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant to the Company together with a duly executed Notice of Exercise (in the form attached hereto) in which the appropriate alternative is initialed by the Holder.  In such event, the Company shall issue to the Holder the number of Warrant Shares computed by applying the following formula:

X = Y (A-B)

             A

Where:

X	=	the number of Warrant Shares to be issued to the Holder;
Y	=	the number of Warrant Shares subject to this warrant (or, if only a portion of this Warrant is being exercised, the number of Warrant Sharessubject to the portion of this Warrant being exercised);
A	=	the Fair Market Value of one Warrant Share (at the date of such exercise); and
B	=	the Purchase Price, as adjusted to the date of such calculation.

For purposes of the above, the “Fair Market Value” of one share shall equal the average of the closing sale prices of the common stock quoted on a Nasdaq Stock Market, the AMEX, or NYSE (collectively, a “Stock Exchange”), or listed in the Over-The-Counter Bulletin Board (or the Pink Sheets) or the closing price quoted on any national securities exchange on which such securities are listed, whichever is applicable, for the ten consecutive trading days immediately prior to the date of determination of Fair Market Value (or, if no sales take place on any such trading day, the average of the closing bid and asked prices on such trading day).  If, however, the common stock is not traded on a Stock Exchange or the Over-The-Counter Bulletin Board or Pink Sheets, the Fair Market Value of a Warrant Share shall be determined in good faith by the Company’s board of directors.

10.           Registration Rights.

(a)           Subject to paragraph (d) of this Section, each time the Company shall determine to proceed with the actual preparation and filing of a registration statement under the Securities Act, in connection with the proposed offer and sale for money of any of its securities by it (other than a registration on Form S-8, S-4 or any successor forms or other inappropriate forms), the Company will give written notice of its determination to Holder.  Upon the written request of Holder given within 30 days after receipt of any such notice from the Company, the Company will, except as herein provided, cause all Warrant Shares with respect to which Holder has requested registration to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by Holder of the shares to be so registered; provided, however, that nothing herein shall prevent the Company from, at any time, abandoning or delaying any such registration initiated by it.  If any such registration pertains to an underwritten offering in whole or in part, the Company may require that the shares requested for inclusion by Holder pursuant to this section be included in the underwritten offering on the same terms and conditions as the securities otherwise being sold through the underwriters.

4

If, in the good faith judgment of the managing underwriter of such underwritten offering, the inclusion of all of the Warrant Shares originally covered by a request for registration made by Holder would reduce the amount of securities to be offered by the Company or interfere with the successful marketing of the securities to be offered by the Company, the number of Warrant Shares owned by or issuable to Holder and otherwise to be included in the underwritten offering may be reduced.  Any Warrant Shares which are thus excluded from the underwritten offering shall be withheld from the market by Holder for a period, not to exceed 180 days, that the managing underwriter reasonably determines is necessary in order to effect the underwritten offering.

(b)           If and whenever the Company is required by the provisions of Section 10(a) to effect the registration of any Warrant Shares under the Securities Act, the Company will:

(i)           prepare and file with the Securities and Exchange Commission (“SEC”) a registration statement with respect to such shares, and use reasonable commercial efforts to cause such registration statement to become and remain effective for such period as may be reasonably necessary to effect the sale of such shares, not to exceed two years from the date of issuance of the covered Warrant Shares;

(ii)           prepare and file with the SEC such amendments to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective for such period as may be reasonably necessary to effect the sale of such securities, not to exceed two years from the date of issuance of the covered Warrant Shares;

(iii)           furnish to Holder and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as Holder and underwriters may reasonably request in order to facilitate the public offering of such securities;

(iv)           use reasonable commercial efforts to register or qualify the securities covered by such registration statement under such state securities or blue sky laws of such jurisdictions as the underwriters may reasonably request within 20 days following the original filing of such registration statement, except that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified; and

(v)           prepare and promptly file with the SEC any amendment or supplement to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Securities Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

5

(c)           With respect to any registration of shares pursuant to Section 10(a), the Company shall bear the following fees, costs and expenses:  all registration, filing and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Company, fees and disbursements of counsel for the underwriter or underwriters of such securities (if the Company and/or selling security holders are required to bear such fees and disbursements), all internal Company expenses, the premiums and other costs of policies of insurance against liability arising out of the public offering, and all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered or qualified.  Fees and disbursements of counsel and accountants for Holder, underwriting discounts and commissions and transfer taxes for Holder and any other expenses incurred by Holder not expressly included above shall be borne by Holder.

(d)           Notwithstanding anything to the contrary herein, the Company shall not be obligated to register the resale of any Warrant Shares purchased for cash  or purchased to Section 9 which have been outstanding for more than one year.

In Witness Whereof, the Company has caused this Warrant to be signed by its duly authorized officer.

PACIFIC ALLIANCE CORPORATION:

By:                                                           

Mark A. Scharmann, President

6

NOTICE OF EXERCISE

(To be signed upon exercise of Warrant)

The Undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of common stock of Pacific Alliance Corporation to which such Warrant relates and herewith makes payment of $______________________ therefor in cash or by certified check (unless the Warrant is being exercised pursuant to Section 9, in which case the box below indicating such fact is checked), and requests that the certificate for such shares be issued in the name of, and be delivered to, _____________________the address for which is set forth below the signature of the undersigned.

 The undersigned is exercising the Warrant pursuant to the Net Issue Exercise provisions of Section 9.

Dated: _______________________, 20____

Signature

Name

Address

City, State, Zip Code

Social Security or Tax Identification No.

7

ASSIGNMENT FORM

(To be signed only upon authorized transfer of Warrant)

For Value Received, the undersigned hereby sells, assigns, and transfers unto _______________________________ the right to purchase the securities of PACIFIC ALLIANCE CORPORATION, a Delaware corporation, to which the within Warrant relates and appoints ______________________, attorney, to transfer said right on the books of PACIFIC ALLIANCE CORPORATION with full power of substitution in the premises.

Dated: _______________________, 20____

Signature

Name

Address

City, State, Zip Code

Social Security or Tax Identification No.

8