LOAN AGREEMENT

THIS LOAN AGREEMENT is between ENERGYTEC, INC. (the “Borrower”) and GLADEWATER
NATIONAL BANK, a Texas Banking corporation (the “Bank”), as follows:

The Borrower desires to borrow from the Bank the amount of FOUR MILLION AND
NO/100 ($4,000,000.00) DOLLARS, and the Bank is willing to lend such amounts to
the Borrower, subject to and upon the terms and conditions set forth.

NOW, THEREFORE, it is agreed:

As security for and to guarantee the full and timely payment of the principal
and interest on the Note and all other Indebtedness or liabilities of the
Borrower to the Bank, whether now existing or hereafter arising:

1.      Borrower will furnish Bank the following date:

a.  Railroad Commission number and name of lease/well(s).

b.  Name of lease operator and mailing address.

c.  Purchaser of product, mailing address, owner and lease number.

d.   Borrowers decimal interest and type (RI, ORR, WI, NRI).

2.      Ownership of minerals must be in same name as borrower.

3.      Lien Instruments. Borrower shall duly execute and deliver to the Bank
Promissory Note, Deed(s) of Trust and Security Agreement(s), together with
Financing Statement(s) pursuant to the Texas Uniform Commercial Code, and
Assignment(s) of Production, in form and substance satisfactory to the Bank and
its counsel, covering the property securing the Indebtedness, and any and all
other documents deemed necessary by the Bank and its counsel to perfect a
security interest with properties being pledged to secure payment of the loan
contemplated hereunder.

4.      Filing and Recording. Bank will, at Borrower’s cost and expense, cause
all instruments and documents given as security pursuant to this Agreement to be
duly recorded and/or filed in all places necessary, in the opinion of the Bank,
to perfect and protect the Deed of Trust lien, or security interest of the Bank
in the property covered thereby. Borrower hereby authorizes the Bank to file any
Financing statement in respect of any security interest created pursuant to this
Agreement which may at any time be required or which, in the opinion of the
Bank, may at any time be desirable although the same may have been executed only
by the Bank, or, at the option of the Bank, should Borrower refuse to execute
same after notice from Bank, to sign such Financing Statement on behalf of the
Borrower and file the same, and the Borrower hereby irrevocably designates the
Bank, its agents, representative, and designees as agents and attorney in fact
for the Borrower for this purpose. If, after notice and opportunity, Borrower
refuses to execute any Financing Statement, and Bank signs and files such
Financing Statement on behalf of Borrower as herein provided, Bank shall
promptly furnish a copy of said financing Statement to Borrower. In the event
that any re-recording or re-filing thereof (or the filing of any statements of
continuation or

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assignment of any Financing Statement) is required to protect and preserve such
mortgage, lien or security interest, the Bank will, at Borrower’s cost and
expense, cause the same to be recorded and/or filed at the time and in the
manner requested by the Bank.

5.      Title Opinion. Borrower will furnish the Bank with Title Opinions
showing Bank as first lien holder, before funding of the loan contemplated
hereunder.

6.      Production payments to come to Bank. Borrower hereunder has, in
accordance with the Deed of Trust, Security Agreement, Financing Statement and
Assignment of Production, assigned to Bank all of the oil, gas, casing head gas,
condensate, and other minerals set forth in the Deed of Trust that may be
produced from the mortgaged property, as defined in the Deed of Trust. Bank will
notify any and all purchasers of production from the mortgaged property of said
assignment(s) and provide Borrower with a copy of such notification. Bank will
receive directly from the purchaser or purchasers of production all proceeds of
oil and gas production accruing to the mortgaged property, for credit to
Borrower hereunder. Upon receipts of the monthly run check, Bank will deposit
all proceeds to Borrower’s Gladewater National Bank checking account. Proceeds
in the amount of the monthly payment as described in Borrower’s note will be
held until such time of the due date of each monthly payment. At that time, the
regularly scheduled monthly payment will be automatically debited from
Borrower’s checking account and applied to Borrower’s note. Bank will mail
Borrower copies of the deposit slip as well as the check vouchers. Upon Borrower
being delinquent in making payment on its note more than twice during any twelve
month period, Bank shall have the right, but not the obligation, at its sole
discretion, and without notice to Borrower, to apply proceeds of productions, at
the time such proceeds are received by the Bank, to pay any monthly payment that
is to become due and payable under the note within 30 days for receipt by the
Bank of the production payment. Bank shall always have the right to apply
production proceeds when received to pay any past due amount under the note.
Production run checks must be made payable as follows:

Gladewater National Bank for the benefit of
ENERGYTEC, INC.
P O Box 1749
Gladewater, Texas 75647

7.       Bank will automatically charge Borrower’s account for note payments of
principal plus interest on the twenty seventh (27th) working day of each month,
copies of transactions will be mailed to Borrower.

8.       If Borrower operates the lease/wells, he will furnish Bank a list of
all equipment, including serial numbers, used on pledged properties. Borrower
agrees to pay for any/all inspections of equipment made by Bank or its agent.

9.      Approval of Operator. Borrower will furnish Bank with the name and
address of the Operator. Any change in Operators must be pre-approved by Bank.
If at any time the Bank should feel that its collateral is in jeopardy due to
inefficient operations, Bank may require a change in operators.

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10.      Properties Operated by Borrower. If Borrower is the Operator of
properties, such properties must be operated in a manner consistent with state
regulatory requirements.

11.      Borrowing Base. During the term of the loan contemplated hereunder, the
Bank will, from time to time, re-evaluate the value of the properties pledged to
secure the loan contemplated hereunder, based on pricing adjusted to market
fluctuations. If such re-evaluation shall reveal that the Borrower exceeds the
borrowing base of the loan (being 80% of present worth of the properties
pledged, as calculated by the Bank, discounted 17.5%, or 80% of the average of
the preceding 6 months’ net monthly income times 32 months, whichever is less),
then and in such event, within thirty (30) day’s written notice by the Bank, the
Borrower shall, as required by the Bank, either:

  (1) pledge additional collateral acceptable by the Bank, in its sole
discretion, in an amount sufficient to cure the borrowing base deficiency; or

   (2) make a principal reduction on the loan, sufficient to cure the borrowing
base deficiency.

  (3) the Bank reserves the right to request that the Borrower pledge as
collateral those properties purchased with funds advanced from the Borrower’s
Master Note.

12.      Affirmative Covenants. So long as the Borrower has any indebtedness
with the Bank, Borrower will:

  a. Furnish to the Bank, within 30 days after the end of the fiscal year, a
copy of its financial statement and related statement of income and expense
prepared in accordance with generally accepted accounting principles by an
independent certified public accountant selected by the Borrower and
satisfactory to the Bank.

  b. Furnish to the Bank financial statements and related statements of income
and expense as stated on page 7 of this Agreement, certified by a proper
accounting officer of the Borrower.

  c. Pay and discharge all taxes, assessments and governmental charges imposed
upon the Borrower or its property prior to the date on which penalties or liens
attach thereto.

  d. Promptly give notice to the Bank of all litigation and all proceedings
before governmental or regulatory agencies affecting the Borrower except
litigation or proceedings not materially affecting the financial condition of
the Borrower.

  e. From time to time, upon request by the Bank, execute and deliver to the
Bank any instrument, document, assignment of other writing which may be
necessary or advisable in the Bank’s opinion to carry our the terms of the
Agreement and to perfect the Bank’s security interest in and facilitate the
collection of any collateral securing the advances.

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  f. Maintain insurance with responsible companies in the amount and types
presently carried by the Borrower with the Bank named as loss payee as its
interest may appear, such policies to be non- cancelable without prior written
notice to the Bank.

  g. Make available to the Bank’s officers the books and records of the
Borrower, including, but not limited to, the subsidiary journals, accounts
receivable files, inventory records, general ledger, and correspondence files.
The Bank has the right to examine its collateral at any reasonable time without
prior notice.

  h. Pay reasonable expenses, including reasonable legal expenses and attorney’s
fees, of the Bank which have been or may be incurred by the Bank in connection
with the preparation of this agreement and the lending and incurring of
obligations or liabilities hereunder, the collection of any note authorized
hereby, or for the enforcement of any of the Borrowers or the Guarantors’
obligations hereunder and under any document executed to secure the payment of
any note authorized hereunder, or the guaranty thereof and for the recording and
filing and re-recording and re-filing of any such document.

  i. Give notice to the Bank in writing of the occurrence of any default, any
change in the name of the Borrower, any change in name, identity or Company
structure.

  j. Give notice to the Bank in writing of any uninsured or partially uninsured
loss through fire, theft, liability or property damage.

13.      Negative Covenants. The Borrower covenants and agrees that without
written consent of the Bank it shall not:

  a. Make any loans to officers of the Company.

  b. From the date of this Agreement, increase the salaries of its officers by
more than 10% annually.

  c. Form any new subsidiary or merge or invest in or consolidate with any
corporation or other entity, or sell, lease, assign, transfer, or otherwise
dispose of (whether in one transaction or as a series of related transaction)
all or substantially all of its assets, now pledged or hereafter pledged as
collateral on loan.

14.      Default. The Borrower shall be in default hereunder if any one of the
following events of default shall occur and be continuing, namely:

  a. Default by the Borrower or Guarantors in the payment of any sums owing to
the Bank or others (hereinafter referred to as the “Indebtedness”) or if the
holder of any such Indebtedness declares such Indebtedness due prior to the
stated maturity because of any default thereunder; or

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  b. Any representation, statement, warranty, projection, or certificate made by
the Borrower or any of the Guarantors in the Loan Documents, or hereafter
furnished to the Bank in connection with any loan or loans hereunder, shall
prove to have been incorrect in any material respect at the time of making or
issuance thereof; or

  c. Default by the Borrower, any of the Guarantors or any other party to the
Loan Documents in the performance of any of the covenants or agreements set
forth in the Loan Documents or in any other agreement or instrument executed
pursuant hereto provided, however, that the provisions of this Agreement shall
control in the event that any of such provisions are in conflict with the
provisions of any other agreement, mortgage, indenture or instrument executed
pursuant hereto and all of such provisions in such other instruments shall be
deemed to be cumulative of the provisions hereof to the extent such provisions
are not inconsistent herewith; or

  d. The Borrower or any of the Guarantors shall apply for or consent to, or
acquiesce in the appointment of a receiver, trustee, or liquidator of itself or
himself or of its or his property, or admit in writing of its or his inability
to pay its or his debts as they mature, or make a general assignment for the
benefit of creditors or an Order of Relief be entered with respect to the
Borrower or any of the Guarantors by any court having competent jurisdiction in
the premises, or file a voluntary petition in bankruptcy or a petition or answer
seeking reorganization, composition, readjustment or arrangement, or similar
relief with creditors, under any present or future statute, law or regulation,
or otherwise, or take advantage of any insolvency law or file an answer
admitting the material allegations of a petition filed against it or him for the
purpose of affecting any of the foregoing, or it or he shall have a receiver or
trustee or assignee in bankruptcy or insolvency appointed for it or him, or its
or his property, without its application or consent; or

  e. The Bank determines in the exercise of its judgment that the Borrowers
financial condition has deteriorated, the prospect of Repayment of the
Indebtedness is impaired or that the value of the Collateral has lessened
materially. Thereupon in any such case, the obligation of the Bank to extend
credit hereunder to or for the account of the Borrower pursuant hereto shall
immediately terminate, and the Bank shall be entitled to each and every remedy
and to take each and every action permitted by the Loan Documents.

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15.      Waiver. No failure to exercise and no delay in exercising on the part
of the Bank of any right, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder, preclude any other right power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law or in any other agreement.

16.       Survival of Agreements. All agreements, representations and warranties
herein made, shall survive the execution and delivery of the Notes and the
Security Instruments and the making and renewal thereof.

17.      Amendment. This Agreement may not be amended except in writing signed
by the Borrower, the Guarantors and the Bank.

18.      Successors. This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Guarantors, the Bank and the successors and assigns
of each party hereto.

19.      Severability. In the case any one or more of the provisions contained
in the Loan Documents should be invalid, illegal, or unenforceable, in any
respect, the validity, legality, and enforceability of the remaining provisions
contained therein shall not in any way be affected thereby.

20.      Lawsuits. The Borrower certifies that there are no outstanding lawsuits
in which it is named.

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AGREEMENT

This Agreement is between ENERGYTEC, INC., (the “Borrower”) and GLADEWATER
NATIONAL BANK, a Texas Banking corporation (the “Bank”) as follows:

The Borrower desires to borrow from the Bank the amount of FOUR MILLION AND
NO/100 ($4,000,000.00) DOLLARS and the Bank is willing to lend such amount to
the Borrower subject to and upon the terms and conditions set forth:

ORIGINATION FEE

$14,000.00  

FINANCIAL STATEMENTS

REQUIRED

HOW OFTEN

QUARTERLY & ANNUALLY

FYE

DECEMBER 31  

INCOME AND EXPENSE

REQUIRED

HOW OFTEN

QUARTERLY & ANNUALLY  

INCOME TAX RETURNS

REQUIRED

HOW OFTEN

ANNUALLY     ENERGYTEC, INC.     February 27, 2006 BY:  /s/ DATE DON LAMBERT,
PRESIDENT     BY:  /s/ DOROTHEA KREMPEIN, VICE PRESIDENT       -BORROWER-  
GLADEWATER NATIONAL BANK     February 27, 2006 BY:  /s/ DATE REDONIA HARPER,
PRESIDENT     -BANK-

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