FIFTH AMENDMENT TO LOAN AGREEMENT

FIFTH AMENDMENT TO LOAN AGREEMENT

THIS FIFTH AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is entered into as of the 15^th day of October 2009, to be effective for all purposes as of July 15, 2009 (the “Effective Date”), by and among PERMIAN LEGEND PETROLEUM, LP, a Texas limited partnership, whose address 3327 West Wadley Avenue, Suite 3, No. 267, Midland, Texas 79707 (the “Borrower”); PERMIAN LEGEND, LLC, a Texas limited liability company, whose address is also 3327 West Wadley Avenue, Suite 3, No. 267, Midland, Texas 79707 (“Permian LLC”); LISA P. HAMILTON, an individual, whose address is 3327 West Wadley Avenue, Suite 3, No. 267, Midland, Texas 79707 (“Hamilton”); RONNIE L. STEINOCHER, also an individual, whose address is 2100 West Wadley Avenue, No. 21, Midland, Texas 79701 (“Steinocher”); and AMERICAN STATE BANK, a Texas banking association, whose address is 620 North Grant, Odessa, Texas ###-###-#### (alternatively “American State”, the “Bank” or the “Lender”). Permian LLC, Hamilton, and Steinocher are collectively referred to herein as the “Guarantors”.

NOTICE IS TAKEN OF THE FOLLOWING:

NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend the terms of the Existing Loan Agreement as follows:

Unless otherwise specifically defined herein, all defined terms used in this Amendment shall have their respective meanings set forth in the Existing Loan Agreement.

2. Amendments.

Rate

Interest under the Notes shall accrue at an annual rate equal to the American State Bank Base Rate, plus two and one-half percentage points (2.5%), and in no event to be less than six and one-half percentage points (6.5%), but in no event to exceed the “Highest Lawful Rate”, as defined in the Notes. For purposes of this Agreement, the “American State Bank Base Rate” shall mean the rate announced by Bank as its base lending rate as of the beginning of each Business Day, as hereinafter defined, (and for holidays or weekends, the American State Bank Base Rate shall be the American State Bank Base Rate as of the close of business on the most recent Business Day immediately preceding such weekend or holiday) before all sums payable hereunder have been paid in full. Without notice to the Borrower or any other person, the American State Bank Base Rate may change from time to time pursuant to the preceding sentence. The American State Bank Base Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Bank may make commercial loans or other loans at rates of interest at, above, or below the American State Bank Base Rate. “Business Day” shall mean any day other than a Saturday, Sunday or legal holiday for commercial banks under the laws of the State of Texas.

Structure

Maker shall tender the monthly accrued interest payments due under the Notes on the fifteenth day of each month, with the next such payment to be due on October 15, 2009, and subsequent payments of interest to be due on the fifteenth day of each subsequent month until maturity on December 15, 2009, when all of the outstanding principal and accrued, but unpaid, interest due under the terms of the Notes shall be due and payable.

Maturity Date

As stated, the Maturity Date of the Loans shall be December 15, 2009. Upon the occurrence of the Maturity Date, all of the outstanding principal, and accrued, but unpaid principal, due under the Loans shall be due and paid in full. In no event shall the Bank be obligated to extend and renew the Loans as of the Extended Maturity Date, and nothing in this Amendment shall be construed to require the Lender to extend and the renew the Loans upon the occurrence of the Extended Maturity Date.

   F. Financial Statements.  The books and records of the Borrower properly reflect the financial condition of the Borrower in all material respects, and there has been no material change in the financial condition of the Borrower or any of the Guarantors, except as previously disclosed in writing to ASB, and as represented in their most recent financial statements.

E. Section III of the Existing Loan Agreement shall be amended by deleting it in its entirety and substituting the following section:

III. CONDITIONS PRECEDENT

The provisions of the Existing Loan Agreement, as amended by this Amendment (as so amended, the “Loan Agreement”), will serve as the proposed terms of the borrowing arrangement. Prior to any funds being made available under the Second Term Loan, Borrower will execute and deliver to the Bank, in form and substance satisfactory to the Bank, this Amendment, the Fifth Modification and Amendment to Term Note (the “Note Modification”), the Second Term Note, and such other documentation as the Bank may require (collectively, the “Amended Loan Documents”).

3. The Borrower and Guarantors will not sell, contract to sell, convey, assign, transfer, mortgage, pledge, hypothecate, encumber, or in any way alienate their interest in any of the properties covered by the Deeds of Trust, without the consent of the Bank. The Bank acknowledges and agrees that the Borrower may elect to sell some or all of the properties covered by the Deeds of Trust in order to fulfill the terms of subparagraph IV(A)(12)(b) above. In order to enable the Borrower to market its properties for such purposes, the Bank agrees to consent to any such sale, and to execute a partial release of the lien created against such properties under the Deeds of Trust. As consideration for such a partial release, the Borrower agrees to tender to the Bank that portion of the proceeds of the sale that is equivalent to the sum of the loan value assigned to the property sold by the Bank under the terms of its most current reservoir engineering report, plus eighty percent (80%) of any sales proceeds received by the Borrower in excess of such loan value. The Bank agrees to provide the Borrower with the loan value assigned to any property upon the Borrower’s request, to execute a partial release covering any property sold, and to deliver the original of such a partial release to Borrower or any purchaser designated by Borrower following the Bank’s receipt of the share of the sales proceeds delineated above. The Bank expressly agrees that the Borrower may use any sales proceeds in excess of those to be tendered to the Bank to pay down the indebtedness due to Baseline, or for such other purposes as the Borrower wishes in order to consummate one or more of the sales, as described above. The Bank further agrees that it will apply any sales proceeds that it receives to the pay down of the indebtedness owed to it by the Borrower, in keeping with the terms of subparagraph IV(A)(12)(b) above.

G. An Event of Default occurs under Borrower’s agreement with Baseline.

3. Effectiveness.

THIS AMENDMENT, THE NOTE MODIFICATION, AND ANY OTHER INSTRUMENTS EXECUTED BY THE PARTIES CONTEMPORANEOUSLY HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date and year first above written.

BORROWER:

PERMIAN LEGEND PETROLEUM LP,

A Texas Limited Partnership

By:       /s/ Ronnie L. Steinocher—
Ronnie L. Steinocher

Manager

GUARANTORS:

      /s/ Lisa P. Hamilton—
Lisa P. Hamilton, Individually

      /s/ Ronnie L. Steinocher—

Ronnie L. Steinocher, Individually

LENDER:

AMERICAN STATE BANK

By:       /s/        Mike Marshall—
Mike Marshall
Executive Vice President

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