CONDITIONAL SECURITY AGREEMENT

CONDITIONAL SECURITY AGREEMENT

THIS CONDITIONAL SECURITY AGREEMENT (this “Agreement”) is made this _____ day of March 2008, by Energytec, Inc., a Nevada corporation, (“Debtor”), and _______________________________________ (“Creditor”).

Section 1.1.     Definitions .  In addition to other terms defined herein, each of the following terms shall have the meaning assigned to it, such definitions to be applicable equally to the singular and the plural forms of such terms and to all genders:

“ Creditor Share ” means ____ percent of fifty percent (50%) of the Net Proceeds.

“ Net Proceeds ” means the cash proceeds from the Debtor’s sale of any portion or all of the Property less brokerage fees, commissions, taxes, assessments and any other fees or costs of the sale transaction paid to third parties including landman and attorneys’ fees.

“ Property ” means all of the Debtor’s working and revenue interests (including all overriding royalty, royalty, working interest, net profits, leasehold, and all other interests) in and to the mineral leases listed on Schedule 1 attached hereto and incorporated herein.

“ Promissory Note ” means that Note dated of even date herewith made by Debtor and payable to the order of Creditor in the principal face amount of $____________, bearing interest as therein provided, containing a provision for, among other things, the payment of attorneys’ fees.

Section 1.2.      Security Interest . Debtor hereby grants to Creditor a security interest in, and pledges to Creditor, the Creditor Share (the “Collateral”).

Section 1.3.      Secured Indebtedness, Note, Other Obligations . This Agreement secures and will secure the payment and performance of the Promissory Note, and all obligations, indebtedness, duties and liabilities and all renewals, extensions, supplements, increases, and modifications thereof in whole or in part from time to time (collectively, the “Secured Indebtedness”).

Section 2.1.     Debtor represents, warrants, and covenants as follows:

(a)     Payment and Performance . Debtor will make due and punctual payment of the Secured Indebtedness. Debtor will timely and properly perform and comply with all of the

covenants, agreements, and conditions imposed upon it by this Agreement and the Promissory Note and will not permit a default to occur hereunder or thereunder.

(b)      Title .  Debtor has, in Debtor’s own right, and Debtor covenants to maintain, lawful, good and marketable title to the Property, is lawfully seized and possessed of the Property and every part thereof, and has the right to convey the same, free and clear of all liens, charges, claims, security interests, and encumbrances except for (i) statutory liens for real estate taxes and assessments on the Property, and (ii) the terms of the mineral leases and any unitizations that define the rights and ownership of the Debtor in the Property.

(c)      Taxes and Other Impositions .  Debtor will pay, or cause to be paid, all taxes, assessments and other charges or levies imposed upon or against or with respect to the Property or the ownership, use, occupancy or enjoyment of any portion thereof, as the same become due and payable, including but not limited to all real estate taxes assessed against the Property or any part thereof. Nothing contained herein shall be construed to require the Debtor to pay any fee or cost to extend the term of any mineral lease included in the Property, and the expiration of a mineral lease included in the Property at the end of its stated term is not a breach or default of this Agreement or the Promissory Note.

(d)      No Other Liens .  Debtor will not, without the prior written consent of Creditor, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any deed of trust, mortgage, voluntary or involuntary lien, whether statutory, constitutional or contractual, security interest, encumbrance or charge against or covering the Property, or any part thereof, regardless of whether the same are expressly or otherwise subordinate to the security interest created in this Agreement, and should any of the foregoing become attached hereafter in any manner to any part of the Property without the prior written consent of Creditor, Debtor will cause the same to be promptly discharged and released.

(e)      Status of Debtor .  Debtor is and will continue to be (i) validly existing and in good standing under the laws of its state of organization, and (ii) possessed of all requisite power and authority to carry on its business and to own and operate the Property. This Agreement and the Promissory Note have been duly authorized, executed and delivered by Debtor, and the obligations thereunder and the performance thereof by Debtor in accordance with their terms are and will continue to be within Debtor’s power and authority (without the necessity of joinder or consent of any other person), are not and will not be in contravention of any other document or agreement to which Debtor or the Property is subject, and do not and will not result in the creation of any encumbrance against any assets or properties of Debtor.

(f)      Further Assurances .  Debtor will, promptly on request of Creditor, (i) correct any defect, error or omission which may be discovered in the contents, execution or acknowledgment of this Agreement, and (ii) execute, acknowledge, deliver, procure and record and/or file such further documents, and do such further acts as may be reasonably necessary to carry out more effectively the purposes of this Agreement. Debtor shall pay all costs connected with any of the foregoing.

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(g)     Fees and Expenses .  Without limitation of any other provision of this Agreement or the Promissory Note and to the extent not prohibited by applicable law, Debtor will pay, and will reimburse to Creditor all costs and expenses, including attorneys’ fees and expenses, incurred or expended in connection with the exercise of any right or remedy, or the defense of any right or remedy or the enforcement of any obligation of Debtor, hereunder or under the Promissory Note.

Section 3.1.       Events of Default . The occurrence of any one of the following shall be a default under this Agreement (“default” or “Default”):

(a)      Failure to Pay Indebtedness .  Any of the Secured Indebtedness is not paid when due, regardless of how such amount may have become due.

(b)      Nonperformance of Covenants .  Any covenant, agreement or condition herein is not fully and timely performed, observed or kept, and such failure is not cured within the applicable notice and cure period (if any) provided for herein.

(c)      Representations .  Any statement, representation or warranty in this Agreement is false, misleading or erroneous in any material respect on the date hereof or on the date as of which such statement, representation or warranty is made.

(d)      Bankruptcy or Insolvency .  The Debtor shall (i) file a voluntary petition in bankruptcy or a voluntary petition seeking reorganization; (ii) file an answer admitting the jurisdiction of the court and any material allegations of an involuntary petition filed pursuant to any act of Congress relating to bankruptcy or to any act purporting to be amendatory thereof; (iii) make an assignment for the benefit of creditors; (iv) apply for or consent to the appointment of any receiver or trustee for the Creditor; or (v) make an assignment to an agent authorized to liquidate any substantial part of the Creditor’s business. An order shall be entered pursuant to any act of Congress relating to bankruptcy or any act purporting to be amendatory thereof approving an involuntary petition seeking reorganization of Creditor or an order of any court shall be entered appointing any receiver or trustee of or for Creditor or of or for all or any substantial portion of its property, and such order approving a petition seeking reorganization or appointing a receiver or trustee is not vacated or stayed or any writ, warrant of attachment, or similar process is not released or bonded within sixty (60) days after its levy or entry.

Section 4.1.      Certain Remedies .  If a Default shall occur, Creditor may (but shall have no obligation to) exercise any one or more of the following remedies, without notice (unless notice is required by applicable statute):

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(a)      Acceleration .  Creditor may at any time and from time to time declare any or all of the Secured Indebtedness immediately due and payable and such Secured Indebtedness shall thereupon be immediately due and payable, without presentment, demand, protest, notice of protest, notice of acceleration or of intention to accelerate or any other notice or declaration of any kind, all of which are hereby expressly waived by Debtor. Without limitation of the foregoing, upon the occurrence of a default described in paragraph (d) of Section 3.1, hereof, all of the Secured Indebtedness shall thereupon be immediately due and payable, without presentment, demand, protest, notice of protest, declaration or notice of acceleration or intention to accelerate, or any other notice, declaration or act of any kind, all of which are hereby expressly waived by Debtor.

(b)      Lawsuits .  Creditor may proceed by a suit or suits in equity or at law, whether for collection of the indebtedness secured hereby, the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted.

(c)      Other Rights and Remedies .  Creditor may exercise any and all other rights and remedies which Creditor may have under this Agreement and the Promissory Note, or at law or in equity or otherwise.

Section 4.2.      Remedies Cumulative .  All rights and remed