Exhibit 10.01

THIS SUBSCRIPTION AGREEMENT IS EXECUTED IN RELIANCE UPON THE EXEMPTION TO AN
OFFERING OF SECURITIES IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S.
PERSONS (AS DEFINED HEREIN) PURSUANT TO RULE 903 OF REGULATION S (“REGULATION
S”) PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”).  THIS OFFERING IS BEING MADE ONLY TO NON-U.S. PERSONS PURSUANT TO RULE
903 OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT.  NONE OF THE
SECURITIES TO WHICH THIS SUBSCRIPTION RELATES HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED,
NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.  IN ADDITION, HEDGING TRANSACTIONS INVOLVING
THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE SECURITIES
ACT.
_________________________

SUBSCRIPTION AGREEMENT
_________________________

THIS SUBSCRIPTION AGREEMENT (this “Subscription”) has been executed by Pegasi
Energy Resources Corporation, a corporation organized under the laws of the
State of Nevada (hereinafter referred to as the “Company”) and the purchaser set
forth in the Omnibus Signature Page (the “Signature Page”) attached hereto (the
“Purchaser”) in connection with the private placement of a minimum of $5,000,000
of units (“Units”) (the “Minimum Offering”) of up to a maximum of $10,000,000
Units (the “Maximum Offering”), each Unit consisting of (i) two common shares of
the Company, par value $0.001 per share (the “Common Stock”), and (ii) a Warrant
to purchase one share of Common Stock (the “Warrants”). Each Warrant has an
exercise price of $0.60 per share of Common Stock.  The Warrants will be
exercisable for a period of three years from the date of issuance. The
Securities (as defined hereinafter) being subscribed for pursuant to this
Subscription have not been registered under the Securities Act.  The offer of
the Securities and, if this Subscription is accepted by the Company, the sale of
Securities, is being made in reliance upon Rule 903 of Regulation S promulgated
under the Securities Act.  All dollar amounts in this Subscription are expressed
in U.S. Dollars.  The Common Stock and Warrants are sometimes referred to
collectively as the “Securities.”

The Units will be offered in a minimum principal amount of $50,000.  The Company
and the Placement Agent (as hereinafter defined) reserve the right, in their
discretion, to accept subscriptions for lesser amounts.

This Subscription is submitted by the undersigned in accordance with and subject
to the terms and conditions described in this Subscription, the Confidential
Private Placement Memorandum of the Company dated on or about June 27, 2011, as
amended and supplemented from time to time, including all attachments, schedules
and exhibits thereto (the “Memorandum”).
 
 
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The terms of the offering of the Units (“Offering”) are more completely
described in the Memorandum and such terms are incorporated herein in their
entirety.

The Purchaser hereby represents and warrants to, and agrees with the Company as
follows:

ARTICLE 1
SUBSCRIPTION

Subscription

1.1           The undersigned Purchaser, as principal, hereby subscribes to
purchase the amount of Units set forth on the Signature Page attached hereto, at
an aggregate purchase price as set forth on the Signature Page (the
“Subscription Funds”).

Minimum Subscription

1.2           A minimum of $50,000 of Units must be purchased by the Purchaser,
unless a lower amount is agreed to by the Company and the Placement Agent, in
their sole discretion.

Method of Payment

1.3           The Purchaser shall pay the Subscription Funds by delivering good
funds in United States Dollars by way of wire transfer of funds to Sichenzia
Ross Friedman Ference LLP, the escrow agent for this Offering (“Escrow
Agent”).  The wire transfer instructions are as set forth in Exhibit B, attached
hereto and made a part hereof.

           Upon receipt of the Subscription Funds and acceptance of this
Subscription by the Company, the Company shall take up the Subscription Funds
(the “Closing Date”) and issue to the Purchaser such number of Units represented
by the amount of the accepted Subscription Funds.  The Purchaser and the Company
acknowledge and agree that the initial closing of the Offering shall be subject
to the Minimum Offering having been subscribed for.

           The Purchaser acknowledges that the subscription for Units hereunder
may be rejected in whole or in part by the Company in its sole discretion and
for any reason, notwithstanding prior receipt by the Purchaser of notice of
acceptance of such subscription.  The Company shall have no obligation hereunder
until the Company shall execute and deliver to the Purchaser an executed copy of
this Subscription.  If this Subscription is rejected in whole, or the offering
of Units is terminated, all funds received from the Purchaser will be returned
without interest or offset, and this Subscription shall thereafter be of no
further force or effect.  If this Subscription is rejected in part, the funds
for the rejected portion of this subscription will be returned without interest
or offset, and this Subscription will continue in full force and effect to the
extent this Subscription was accepted.

 
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Term; Termination

1.4           If the Minimum Offering is not subscribed for on or prior to July
15, 2011, all funds received from the Purchaser will be returned without
interest or offset, and this Subscription shall thereafter be of no further
force or effect.  The Offering may be extended to September 15, 2011 upon the
mutual agreement of the Company and Beaufort International Associates Limited
(the “Placement Agent”) (the “Offering Period”).

1.5           All funds received from the Purchaser will held in a
non-interest-bearing escrow account by the Escrow Agent, pending the earlier of
(a) one or more closings after reaching the Minimum Offering, (b) completion of
the Maximum Offering or (c) the end of the Offering Period.

Attorney-in-Fact

1.6           To effectuate the terms and provisions hereof, the Purchaser
hereby appoints Beaufort International Associates Limited (“Beaufort”) as its
attorney-in-fact for the purpose of carrying out the provisions of the escrow
agreement by and between the Company, Beaufort and the Escrow Agent (the “Escrow
Agreement”) including, without limitation, taking any action on behalf of, or at
the instruction of, the Purchaser and executing any release notices required
under the Escrow Agreement and taking any action and executing any instrument
that Beaufort may deem necessary or advisable (and lawful) to accomplish the
purposes hereof.  All acts done under the foregoing authorization are hereby
ratified and approved and neither Beaufort  nor any designee nor agent thereof
shall be liable for any acts of commission or omission, for any error of
judgment, for any mistake of fact or law except for acts of gross negligence or
willful misconduct.  This power of attorney, being coupled with an interest, is
irrevocable while the Escrow Agreement remains in effect.

ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
 
Representations and Warranties

2.1           The Purchaser represents and warrants to the Company, with the
intent that the Company will rely thereon in accepting this Subscription, that:

(a)  
Non-U.S. Purchaser.  The Purchaser is outside the United States when receiving
and executing this Subscription Agreement and the Purchaser is not a U.S. Person
as defined in Rule 902 of Regulation S promulgated under the Securities Act and
as set forth in Exhibit A attached hereto and made a part hereof;

(b)  
Experience.  The Purchaser is sufficiently experienced in financial and business
matters to be capable of evaluating the merits and risks of its investments, and
to make an informed decision relating thereto, and to protect its own interests
in connection with the purchase of the Securities;

 
 
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(c)  
Own Account.  The Purchaser is purchasing the Securities as principal for its
own account and not for the account or benefit of, directly or indirectly, any
U.S. Person.  The Purchaser is purchasing the Securities for investment purposes
only and not with a view to resale or distribution and, in particular, it has no
intention to distribute either directly or indirectly any of the Units in the
United States or to U.S. Persons;

(d)  
Exemption.  The Purchaser understands that none of the Securities have been
registered under the 1933 Act, or under any state securities or “blue sky” laws
of any state of the United States, and, unless so registered, may not be offered
or sold in the United States or, directly or indirectly, to U.S. Persons, except
in accordance with the provisions of Regulation S, pursuant to an effective
registration statement under the 1933 Act, or pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the 1933 Act
and in each case in accordance with applicable state and provincial securities
laws;

(e)  
Importance of Representations.  The Purchaser understands that the Units are
being offered and sold to it in reliance on an exemption from the registration
requirements of the Securities Act, and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the applicability of such safe harbor and the suitability of the
Purchaser to acquire the Units;

(f)  
No Registration.  The Securities have not been registered under the Securities
Act or any state securities laws and may not be transferred, sold, assigned,
hypothecated or otherwise disposed of unless registered under the Securities Act
and applicable state securities laws or unless an exemption from such
registration is available.  The Purchaser represents and warrants and hereby
agrees that all offers and sales of the Units and the Securities shall be made
only pursuant to such registration or to such exemption from registration;

(g)  
Risk.  The Purchaser acknowledges that the purchase of the Units involves a high
degree of risk, is aware of the risks and further acknowledges that it can bear
the economic risk of the Units, including the total loss of its investment.  The
Purchaser has adequate means of providing for its financial needs and
foreseeable contingencies and has no need for liquidity of its investment in the
Units for an indefinite period of time;

(h)  
Memorandum.  The Purchaser and its purchaser representatives, if any, have
received the Memorandum and all other documents requested by the Purchaser, have
carefully reviewed them and understand the information contained therein;

(i)  
Independent Investigation.  The Purchaser, in making the decision to purchase
the Units subscribed for, has relied upon independent investigations made by it
and its purchaser representatives, if any, and the Purchaser and such
representatives, if any, have prior to any sale to it been given access and the
opportunity to examine all material contracts and documents relating to this
Offering and an opportunity to ask questions of, and to receive answers from,
the Company or any person acting on its behalf concerning the terms and
conditions of this Offering.  The Purchaser and its advisors, if any, have been
furnished with access to all materials relating to the business, finances and
operation of the Company and materials relating to the offer and sale of the
Units (including, without limitation, the Memorandum) which have been
requested.  The Purchaser and its advisors, if any, have received complete and
satisfactory answers to any such inquiries;

 
 
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(j)  
No Recommendation or Endorsement.  The Purchaser understands that no federal,
state or other regulatory authority has passed on or made any recommendation or
endorsement of the Units.  Furthermore, the foregoing authorities have not
confirmed the accuracy or determined the adequacy of this Subscription or the
Memorandum.  Any representation to the contrary is a criminal offense;

(k)  
No Representation. In evaluating the suitability of an investment in the
Company, the Purchaser has not relied upon any representation or information
(oral or written) other than as stated in this Subscription and in the
Memorandum;

(l)  
No Tax, Legal, Etc. Advise. The Purchaser is not relying on the Company, the
Placement Agent (as defined in the Memorandum) or any of their respective
employees or agents with respect to the legal, tax, economic and related
considerations of an investment in the Units, and the Purchaser has relied on
the advice of, or has consulted with, only its own advisers;

(m)  
No Directed Selling Efforts.  The Purchaser has not acquired the Units as a
result of, and will not itself engage in, any “directed selling efforts” (as
defined in Regulation S under the 1933 Act) in the United States in respect of
the Units which would include any activities undertaken for the purpose of, or
that could reasonably be expected to have the effect of, conditioning the market
in the United States for the resale of the Units; provided, however, that the
Purchaser may sell or otherwise dispose of the Units pursuant to registration
thereof under the 1933 Act and any applicable state and provincial securities
laws or under an exemption from such registration requirements;

(n)  
No Plan or Scheme.  Purchaser acknowledges that the statutory and regulatory
basis for the exemption from U.S registration requirements claimed for the offer
of the Units, although in technical compliance with Regulation S, would not be
available if the offering is part of a plan or scheme to evade the registration
provisions of the 1933 Act or any applicable state or provincial securities
laws;

(o)  
Foreign Jurisdiction.  Purchaser hereby represents that it has satisfied itself
as to the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Units or any use of this Subscription Agreement,
including: (a) the legal requirements within its jurisdiction for the purchase
of the Units; (b) any foreign exchange restrictions applicable to such purchase;
(c) any governmental or other consents that may need to be obtained; and (d) the
income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale or transfer of the Units.  Such Purchaser’s
subscription and payment for, and its continued beneficial ownership of the
Units, will not violate any applicable securities or other laws of the
Purchaser’s jurisdiction and

(p)  
Short Sales and Confidentiality after the Date Hereof. The Purchaser covenants
that neither it, nor any Affiliate acting on its behalf or pursuant to any
understanding with it, will execute any “short sales” as defined in Rule 200 of
Regulation SHO under the Securities Exchange Act of 1934, as amended (“Short
Sales”, which shall not be deemed to include the location and/or reservation of
borrowable shares of common stock) during the period commencing at the time it
first became aware of this Offering and ending at the time that the transactions
contemplated by this Subscription are first publicly announced.  The Purchaser
covenants that until such time as the transactions contemplated by this
Subscription are publicly disclosed by the Company such Purchaser will maintain
the confidentiality of the existence and terms of this Offering and the
information included in this Subscription and the Memorandum.  The Purchaser
acknowledges the positions of the Securities and Exchange Commission
(“Commission”) set forth in Item 65, Section A, of the Manual of Publicly
Available Telephone Interpretations, dated July 1997, compiled by the Office of
Chief Counsel, Division of Corporation Finance.  Notwithstanding the foregoing,
Purchaser makes no representation, warranty or covenant hereby that it will not
engage in Short Sales in the securities of the Company after the time that the
Offering is publicly announced.  Notwithstanding the foregoing, if Purchaser is
a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered by
this Subscription.

 
 
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Survival

2.2           The representations and warranties of the Purchaser contained
herein will be true at the date of execution of this Subscription by the
Purchaser and as of the Closing Date in all material respects as though such
representations and warranties were made as of such times and shall survive the
Closing Date and the delivery of the  Units.  The Purchaser agrees that it will
notify and supply corrective information to the Company immediately upon the
occurrence of any change therein occurring prior to the Company’s issuance of
the Units.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

3.1           The Company, upon taking up and accepting this
Subscription,  represents and warrants in all material respects to the
Purchaser, with the intent that the Purchaser will rely thereon in making this
Subscription, that:
 
(a)  
Legality.  The Company has the requisite corporate power and authority to take
up and accept this Subscription and to issue, sell and deliver the Units; this
Subscription and the issuance, sale and delivery of the Units hereunder and the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action by the Company; this Subscription and the Units have
been duly and validly executed and delivered by and on behalf of the Company,
and are valid and binding agreements of the Company, enforceable in accordance
with their respective terms, except as enforceability may be limited by general
equitable principles, bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or other laws affecting creditors’ rights generally;

(b)  
Proper Organization.  The Company and its subsidiaries (“Subsidiaries”) are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdiction of incorporation and are duly qualified as
a foreign corporation in all jurisdictions where the failure to be so qualified
would have a materially adverse effect on their business, taken as whole;

(c)  
No Legal Proceedings.  Except as disclosed in the Memorandum, there is no
action, suit or proceeding before or by any court or any governmental agency or
body, domestic or foreign, now pending or to the knowledge of the Company,
threatened, against or affecting the Company or its Subsidiaries, or any of
their properties or assets, which might result in (i) a material adverse effect
on the legality, validity or enforceability of this Subscription or the Units
(collectively, the “Transaction Documents”), (ii) a material adverse effect on
the results of operations, assets, business, prospects or condition (financial
or otherwise) of the Company and its Subsidiaries, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under any Transaction Document (any of
(i), (ii) or (iii), a “Material Adverse Effect”);

(d)  
Non-Default.  Except as disclosed in the Memorandum, neither the Company nor any
of its Subsidiaries is in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property may be bound;

(e)  
No Misleading Statements.  The information provided by the Company to the
Purchaser does not contain any untrue statement of a material fact or omit to
state any material fact;

(f)  
Absence of Non-Disclosed Facts.  There is no fact known to the Company (other
than general economic conditions known to the public generally) that has not
been disclosed in writing to the Purchaser that has or could reasonably be
expected to have a Material Adverse Effect;

 
 
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(g)  
Non-Contravention.  The acceptance of this Subscription and the consummation of
the issuance of the Units and the transactions contemplated by this Subscription
do not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under the Articles of
Incorporation or Bylaws of the Company, or any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which it or any of its properties or assets
are bound, or any existing applicable decrees, judgment or order of any court,
federal, state or provincial regulatory body, administrative agency or other
domestic governmental body having jurisdiction over the Company or any of its
properties or assets;

(h)  
Filings, Consents and Approvals.  The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
the filing of Form D with the Commission and such filings as are required to be
made under applicable state securities laws;

(i)  
Issuance of the Units.  The Units are duly authorized and, when issued and paid
for in accordance with the applicable Transaction Documents, will be duly and
validly issued, fully paid and nonassessable, free and clear of all liens,
charges, security interests, encumbrances, preemptive rights or other
restrictions imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The Securities, when issued in accordance
with the terms of the Transaction Documents, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.  The Company
has reserved from its duly authorized capital stock the maximum number of shares
of Common Stock issuable upon exercise of the Warrants;

(j)  
Capitalization.  The capitalization of the Company is as set forth in the
Memorandum, which includes the number of shares of common stock owned
beneficially, and of record, by Affiliates of the Company as of the date
hereof.  No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents, except as set forth in the
Memorandum.  Except as set forth in the Memorandum and as a result of the
purchase and sale of the Securities, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of common stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of common stock.  Except as set forth in
the Memorandum, the issuance and sale of the Units will not obligate the Company
to issue shares of common stock or other securities to any Person (other than
the Purchaser and other purchasers entering into a subscription substantially
identical to this Subscription (collectively, the “Purchasers”)) and will not
result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  No further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance and sale of the
Securities.  Except as disclosed in the Memorandum, there are no stockholders
agreements, voting agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company, between or
among any of the Company’s stockholders;

(k)  
Title to Assets.  The Company and its Subsidiaries have good and marketable
title to the leasehold interest owned by it and good and marketable title in all
personal property owned by it that is material to the business of the Company
and the Subsidiaries in each case free and clear of all Liens, except for Liens
as do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries and Liens for the payment of federal, state or
other taxes, the payment of which is neither delinquent nor subject to
penalties.  Any real property and facilities held under lease by the Company and
the Subsidiaries is held by them under valid, subsisting and enforceable leases
with which the Company and the Subsidiaries are in compliance;

(l)  
Environmental Compliance.  The Company and its Subsidiaries are and have been in
compliance in all material respects with all applicable federal, state and local
laws, regulations and codes, in each case relating to pollution, protection of
the environment or public health and safety (collectively, “Environmental
Laws”).  There is no civil, criminal or administrative judgment, action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter pending or, to the knowledge of the Company, threatened against
the Company or its Subsidiaries pursuant to Environmental Laws which would
reasonably be expected to have a Material Adverse Effect; and, to the knowledge
of the Company, there are no past or present events, conditions, circumstances,
activities, practices, incidents, agreements, actions or plans which may prevent
compliance with, or which have given rise to or will give rise to liability
under, Environmental Laws, that would reasonably be expected to have a Material
Adverse Effect;

 
 
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(m)  
Transactions with Affiliates and Employees.  Except as set forth in the
Memorandum, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $100,000 other than for (i) payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company;

(n)  
Internal Accounting Controls.  The Company and the Subsidiaries will maintain 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. The Company will establish disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
as amended (“Exchange Act”)) for the Company and designed such disclosure
controls and procedures to ensure that information required to be disclosed by
the Company in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Commission’s rules and forms;

(o)  
Tax Status.  Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary;

(p)  
No General Solicitation.  Neither the Company nor any person acting on behalf of
the Company has offered or sold any of the Securities by any form of general
solicitation or general advertising.  The Company has offered the Securities for
sale only to the Purchasers and non- “U.S. person” within the meaning of Rule
902 of Regulation S promulgated under the Securities Act; and

(q)  
Foreign Corrupt Practices.  Neither the Company nor, to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.

 
 
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Survival

3.2           The representations and warranties of the Company will be true and
correct as of the Closing Date in all material respects and shall survive the
Closing Date and the delivery of the Securities.

ARTICLE 4
COVENANTS OF THE COMPANY

Covenants of the Company

4.1           The Company covenants and agrees with the Purchaser that:

(a)  
Filings.  The Company shall make all necessary filings in connection with the
sale of the Securities as required by the laws and regulations of all
appropriate jurisdictions and securities exchanges, including but not limited to
“Form D”;

(b)  
Integration.  The Company shall not sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers; and

(c)  
Non-Public Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it nor any other Person acting on its
behalf, will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information.  The Company understands and
confirms that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company.

Survival

4.2           The covenants set forth in this Article shall survive the Closing
Date for the benefit of the Purchaser.
 
 
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ARTICLE 5
ISSUANCE OF SECURITIES

5.1           As soon as practicable after the Closing Date, the Company shall
issue and deliver, or shall cause the issuance and delivery of, the Units in the
name or names specified by the Purchaser purchased in the Offering.  Such
Securities shall bear a legend in substantially the following form:

“THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT
U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).  ACCORDINGLY, NONE
OF THE SECURITIES TO WHICH THIS CERTIFICATE RELATES HAVE BEEN REGISTERED UNDER
THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE
MAY BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED HEREIN) OR, DIRECTLY OR
INDIRECTLY, TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING
TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE
WITH THE 1933 ACT. “UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY
REGULATION S UNDER THE 1933 ACT.”

5.2           The legend(s) set forth above shall be removed, and the Company
shall issue a certificate without such legend to the transferee of the
Securities represented thereby, if, unless otherwise required by state
securities laws, (i) such Securities have been sold under an effective
registration statement under the Securities Act, (ii) such Securities have been
sold pursuant to a valid exemption under the Securities Act or (iii) such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission).  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 5.

ARTICLE 6
CLOSING

Closing shall be effected through the delivery of the Subscription Funds by the
Escrow Agent to the Company and the delivery of the Units purchased in the
Offering by the Company to the Purchaser (or the Purchaser’s representative),
together with a copy of this Subscription Agreement, duly executed.

 
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ARTICLE 7
INDEMNIFICATION

Indemnification of the Company

7.1           The Purchaser agrees to indemnify and hold harmless the Company
against and in respect of any and all loss, liability, claim, damage,
deficiency, and all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses whatsoever (including, but not limited to,
attorneys' fees reasonably incurred in investigating, preparing, or defending
against any litigation commenced or threatened or any claim whatsoever through
all appeals) arising out of or based upon any false representation or warranty
or breach or failure by the Purchaser to comply with any covenant,
representation or other provision made by it herein or in any other document
furnished by it in connection with this Subscription, provided, however, that
such indemnity, shall in no event exceed the net proceeds received by the
Company from the Purchaser as a result of the sale of Securities to the
Purchaser.

Indemnification of the Purchaser

7.2           The Company agrees to indemnify and hold harmless the Purchaser
against and in respect of any and all loss, liability, claim, damage,
deficiency, and all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses whatsoever (including, but not limited to,
attorneys' fees reasonably incurred in investigating, preparing, or defending
against any litigation commenced or threatened or any claim whatsoever through
all appeals) arising out of or based upon any false representation or warranty
or breach or failure by the Company to comply with any covenant, representation
or other provision made by it herein or in any other document furnished by it in
connection with this Subscription.

ARTICLE 8
GENERAL PROVISIONS

Governing Law

8.1           This Subscription shall be governed by and construed under the law
of the State of New York without regard to its choice of law provision.  Any
disputes arising out of, in connection with, or with respect to this
Subscription, the subject matter hereof, the performance or non-performance of
any obligation hereunder, or any of the transactions contemplated hereby shall
be adjudicated in a court of competent civil jurisdiction sitting in New York,
New York and nowhere else.  The parties hereby consent to the service of process
in any such action or legal proceeding by means of registered or certified mail,
return receipt requested. The address for service of process shall be (a) to the
Company, at 218 N. Broadway, Suite 204, Tyler, Texas 75702, Attn: CEO, and (b)
to the Purchaser, at the address set forth on the Signature Page hereto, or, in
each case, to such other address as each party shall subsequently furnish in
writing to the other.  In any action, suit or proceeding brought by any party
against any other party, the parties each knowingly and intentionally, to the
greatest extent permitted by applicable law, hereby absolutely, unconditionally,
irrevocably and expressly waive forever trial by jury.
 
 
11

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Successors and Assigns

8.2           This Subscription shall inure to the benefit of and be binding on
the respective successors and assigns of the parties hereto.

Execution by Counterparts and Facsimile

8.3           This Subscription may be executed in counterparts and by
facsimile, each of which when executed by any party will be deemed to be an
original and all of which counterparts will together constitute one and the same
Subscription.

Independent Legal Advice

8.4           The parties hereto acknowledge that they have each received
independent legal advice with respect to the terms of this Subscription and the
transactions contemplated herein or have knowingly and willingly elected not to
do so.

Severability

8.5           If any term, provision, covenant or restriction of this
Subscription is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.

[Remainder of page intentionally left blank]
 
 

 
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SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT

Purchaser hereby elects to subscribe under the Subscription Agreement for a
total of ___________ Units, at a cost of $1.00 per Unit.
 
Purchaser acknowledges receipt of the Confidential Private Placement Memorandum
of the Company dated on or about June 27, 2011.
 
Purchaser’s signature below constitutes execution of the Subscription Agreement.
 

 
Date: ___, 2011.
 
If the purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS, as TENANTS
IN COMMON, or as COMMUNITY PROPERTY:
 
___________________________
______________________________

Print Purchaser Name
Print Co-Purchaser Name (if applicable)

   

___________________________
______________________________

Signature of Purchaser
Signature of Co-Purchaser (if applicable)

 
___________________________
 

Address
 

 
If the purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST:
 
___________________________
______________________________

Name of Partnership,
Corporation, Limited
Liability Company or Trust
Country of Organization

                                                              

By:_________________________  By:_________________________

Name:
Name:

Title:
Title:

 
___________________________
 

Address
 

 
PLEASE FAX OR E-MAIL A COPY OF THE COMPLETED AND SUBSCRIPTION AGREEMENT TO:

Attn: Sanjeev Verma
Beaufort International Associates Limited
49 Whitehall, London, SW1A 2BX
United Kingdom
Facsimile:  +44 20 7389 5080
Sanjeev.verma@beaufort-int.co.uk
 
 
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PEGASI ENERGY RESOURCES CORPORATION
SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT

Pegasi Energy Resource Corporation’s signature below constitutes execution of
the Subscription Agreement.
 

 
ACCEPTED AND AGREED TO
this ___ day of ___________, 2011.

PEGASI ENERGY RESOURCES CORPORATION

By:______________________________
       Name:
Title:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
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EXHIBIT A – REGULATION S QUESTIONNAIRE FOR NON-U.S. PURCHASERS

The undersigned Purchaser (a “Reg S Person”) is not a U.S. Person as defined in
Section 902 of Regulation S promulgated under the Securities Act, and hereby
represents that the representations in paragraphs (1) through (9) are true and
correct with respect to such Reg S Person.
 
(1)
Such Reg S Person acknowledges and warrants that (i) the issuance and sale to
such Reg S Person of the Securities is intended to be exempt from the
registration requirements of the Securities Act, pursuant to the provisions of
Regulation S; (ii) it is not a “U.S. Person,” as such term is defined in
Regulation S and herein, and is not acquiring the Securities for the account or
benefit of any U.S. Person; and (iii) the offer and sale of the Securities has
not taken place, and is not taking place, within the United States of America or
its territories or possessions.  Such Reg S Person acknowledges that the offer
and sale of the Securities has taken place, and is taking place in an “offshore
transaction,” as such term is defined in Regulation S.

 
(2)
Such Reg S Person acknowledges and agrees that, pursuant to the provisions of
Regulation S, the Securities cannot be sold, assigned, transferred, conveyed,
pledged or otherwise disposed of to any U.S. Person or within the United States
of America or its territories or possessions for a period of six months from and
after the Closing Date, unless such shares are registered for sale in the United
States pursuant to an effective registration statement under the Securities Act
or another exemption from such registration is available.  Such Reg S Person
acknowledges that it has not engaged in any hedging transactions with regard to
the Securities.

 
(3)
Such Reg S Person consents to the placement of a legend on any certificate, note
or other document evidencing the Securities and understands that the Company
shall be required to refuse to register any transfer of Securities not made in
accordance with applicable U.S. securities laws.

 
(4)
Such Reg S Person is not a “distributor” of securities, as that term is defined
in Regulation S, nor a dealer in securities. Such Reg S Person is purchasing the
Securities as principal for its own account, for investment purposes only and
not with an intent or view towards further sale or distribution (as such term is
used in Section 2(11) of the Securities Act) thereof, and has not pre-arranged
any sale with any other purchaser and has no plans to enter into any such
agreement or arrangement.

 
(5)
Such Reg S Person is not an Affiliate of the Company nor is any Affiliate of
such Reg S Person an Affiliate of the Company. An “Affiliate” is an individual
or corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind (each of the
foregoing, a “Person”) that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 405 under the
Securities Act.  With respect to a Reg S Person, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Reg S Person will be deemed to be an Affiliate of such Reg S Person.

 
(6)
Such Reg S Person understands that the Securities have not been registered under
the Securities Act or the securities laws of any state and are subject to
substantial restrictions on resale or transfer.  The Securities are “restricted
securities” within the meaning of Regulation S and Rule 144, promulgated under
the Securities Act.

 
(7)
Such Reg S Person acknowledges that the Securities may only be sold offshore in
compliance with Regulation S or pursuant to an effective registration statement
under the Securities Act or another exemption from such registration, if
available.  In connection with any resale of the Securities pursuant to
Regulation S, the Company will not register a transfer not made in accordance
with Regulation S, pursuant to an effective registration statement under the
Securities Act or in accordance with another exemption from the Securities Act.

 
 
 

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(8)
Such Reg S Person represents that it has satisfied itself as to the full
observance of the laws of its jurisdiction in connection with the offering of
the Securities, including: (a) the legal requirements within its jurisdiction
for the purchase of the Securities; (b) any foreign exchange restrictions
applicable to such purchase; (c) any governmental or other consents that may
need to be obtained; and (d) the income tax and other tax consequences, if any,
that may be relevant to the purchase, holding, redemption, sale or transfer of
the Securities.  Such Reg S person’s subscription and payment for, and its
continued beneficial ownership of the Securities, will not violate any
applicable securities or other laws of the jurisdiction of its residence.

 
(9)
Such Reg S Person makes the representations, declarations and warranties as
contained in this Exhibit A with the intent that the same shall be relied upon
by the Company in determining its suitability as a purchaser of such Securities.

 
___________________________
__________________________________

Name of Purchaser (Print) 
Name of Joint Purchaser (if any) (Print)  

 
___________________________
_________________________________

Signature of Purchaser 
Signature of Joint Purchaser (if any)   

 
___________________________
________________

Capacity of Signatory (for entities)   
Date

 
   
PLEASE FAX OR E-MAIL A COPY OF THE COMPLETED AND EXECUTED REGULATION S
QUESTIONNAIRE TO:

Attn: Sanjeev Verma
Beaufort International Associates Limited
49 Whitehall, London, SW1A 2BX
United Kingdom
Facsimile:  +44 20 7389 5080
Sanjeev.verma@beaufort-int.co.uk