COMPENSATION AGREEMENT

EXHIBIT 10.1

COMPENSATION  AGREEMENT

This Compensation Agreement is dated as of September 3, 2008 by and between Pegasi Energy Resources Corporation, a Nevada corporation (the “Company”) and Marc Ross, a member of the law firm of Sichenzia Ross Friedman Ference LLP (“Ross”).

WHEREAS, the Company has requested that Ross provide the Company with legal services relating to the preparation of documents in connection with a private placement of the Company’s debt securities, and Ross has agreed to provide the Company with such legal services; and

WHEREAS, the Company wishes to compensate Ross with shares of its common stock for such services rendered;

NOW THEREFORE, in consideration of the mutual covenants hereinafter stated, it is agreed as follows:

1.           The Company will issue to Ross, upon filing of the Form