Plan For Compensation Of Independent Directors

GENERAL

The Company’s Board of Directors has adopted a resolution approving, declaring advisable and recommending to the stockholders for their approval, a proposal to approve and adopt a plan or arrangement (the “Plan”) providing that the Board of Directors may in its discretion from time to time to compensate independent outside directors either in cash or in stock, provided that such compensation does not exceed the limits of compensation for determination of the independence of directors under rules and regulations of the Securities and Exchange Commission or the NYSE American exchange. The Company’s shareholders approved the plan at the annual shareholder’s meeting in 2006 and specifically allowed grants to independent directors in the future under the Plan without additional shareholder action or approval.

OPERATION OF THE PLAN

The Plan operates as follows:

At any time, and from time to time, the Board of Directors may grant compensation to any or all independent directors serving on the Company’s Board of Directors as the Board may deem appropriate in the form of cash or Company stock, provided that the value of such compensation does not exceed the limits of compensation for determination of the independence of directors under rules and regulations of the Securities and Exchange Commission or the American Stock Exchange (“AMEX”) or such other exchange upon which shares of the Company may be listed. The Board may, but is not required, to consider the recommendations of the Compensation/Stock Option Committee with regard to any such cash or equity compensation to be awarded.

A determination to grant compensation in cash or in stock or combination thereof shall be made by a majority vote of the directors present at any regular or special meeting of the Board of Directors or in an action taken without meeting as provided by state law. Any independent director may, but shall not be required to, abstain from the vote upon any such determination of grant that may be a grant to that director; provided however that all directors shall vote on such determination if one or more abstention(s) by independent director(s) for this reason would reduce the number of directors present and voting to less than a majority of the directors present at the meeting. No vote by any independent director on any such proposal whether voluntary or required by the previous sentence shall be considered to be a conflict of interest under state law sufficient to invalidate the determination by the Board to make the grant.

The Board of Directors may award such cash or stock to any number of independent directors as it deems appropriate, and may but is not required to award cash or stock to all independent directors at such time any award to one or more independent directors is made. Such awards may be for past, present, or future service as the Board in its discretion may determine to be appropriate. Such awards may be made at any time, and from time to time in the future without need for any additional shareholder approval as to any future award under this Plan, as the Board in its discretion shall deem appropriate and necessary to adequately compensate one or more independent directors for service on the Board or its committees.

The award of cash or stock pursuant to the Plan shall not affect any determination by the Compensation/Stock Option Committee to grant options to any independent director under the Tengasco, Inc. Stock Incentive Plan administered by that committee.

Any shares issued pursuant to an award under the Plan shall be unregistered shares and bear appropriate restrictions upon transfer, unless by further specific determination of the Board any stock to be awarded is to be an award of stock that is registered under federal securities laws or has become free of restrictions upon transfer by operation of securities laws.