TENGASCO INC
CREDIT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>3
<FILENAME>c22252_ex10-21.txt
<DESCRIPTION>CREDIT AGREEMENT
<TEXT>


                                CREDIT AGREEMENT






                        REDUCING REVOLVING LINE OF CREDIT
                             OF UP TO $35,000,000.00


                                      FROM


                                  BANK ONE, NA


                                       TO


                                 TENGASCO, INC.,
                    TENNESSEE LAND & MINERAL CORPORATION AND
                          TENGASCO PIPELINE CORPORATION


                                November 8, 2001


<PAGE>


                                CREDIT AGREEMENT

                             dated November 8, 2001

                                      from

                                  BANK ONE, NA

                                       to

                                 TENGASCO, INC.,
                    TENNESSEE LAND & MINERAL CORPORATION AND
                          TENGASCO PIPELINE CORPORATION




                                TABLE OF CONTENTS

ARTICLE I.

     DEFINITIONS ............................................................  1

ARTICLE II.

     THE LOAN ............................................................... 11
     2.01    The Revolving Loan ............................................. 11
     2.02    Advances and Payments of Principal Under the Revolving Note .... 12
     2.03    Payments of Interest under the Revolving Note .................. 12
     2.04    General Provisions Relating to Interest ........................ 12
     2.05    Borrowing Base Determination ................................... 13
     2.06    Mandatory Prepayment of the Note ............................... 14
     2.07    Advances to Satisfy Obligations of the Borrower ................ 15
     2.08    Assignment of Production ....................................... 15
     2.09    Commitment Fee ................................................. 15
     2.10    Facility Fee ................................................... 15
     2.11    Administrative Fee ............................................. 16
     2.12    Addition/Deletion of Borrowing Base Oil & Gas Properties ....... 16
     2.13    Adjustment to Revolving Commitment Limit ....................... 16

ARTICLE III.

     CONDITIONS ............................................................. 17

                                        i
<PAGE>


     3.01    Conditions to the Closing ...................................... 17
     3.02    Documents Required for Subsequent Disbursements ................ 18
     3.03    General Conditions to all Disbursements ........................ 18
     3.04    Legal Matters .................................................. 19

ARTICLE IV.

     REPRESENTATIONS AND WARRANTIES ......................................... 19
     4.01    Existence ...................................................... 19
     4.02    Due Authorization .............................................. 20
     4.03    Valid and Binding Obligations .................................. 20
     4.04    Scope and Accuracy of Financial Statements ..................... 20
     4.05    Title to Borrowing Base Oil and Gas Properties ................. 20
     4.06    Oil and Gas Leases ............................................. 20
     4.07    Interest in the Borrowing Base Oil and Gas Properties .......... 21
     4.08    Oil and Gas Contracts .......................................... 21
     4.09    Producing Wells ................................................ 21
     4.10    Purchasers of Production ....................................... 22
     4.11    Authorizations and Consents .................................... 22
     4.12    Environmental Laws ............................................. 22
     4.13    Compliance with Laws, Rules, Regulations and Orders ............ 23
     4.14    Liabilities, Litigation and Restrictions ....................... 23
     4.15    Existing Indebtedness .......................................... 23
     4.16    Material Commitments ........................................... 23
     4.17    Margin Stock ................................................... 24
     4.18    Proper Filing of Tax Returns and Payment of Taxes Due .......... 24
     4.19    ERISA .......................................................... 24
     4.20    Investment Company Act Compliance .............................. 24
     4.21    Public Utility Holding Company Act Compliance .................. 24
     4.22    Insurance ...................................................... 25
     4.23    Material Misstatements and Omissions ........................... 25
     4.24    Pipeline Assets ................................................ 25
     4.25    Ownership Interests ............................................ 25

ARTICLE V.

     AFFIRMATIVE COVENANTS .................................................. 25
     5.01    Use of Funds ................................................... 25
     5.02    Maintenance and Access to Records .............................. 25
     5.03    Quarterly Unaudited Financial Statements ....................... 25
     5.04    Annual Audited Financial Statements ............................ 26
     5.05    Compliance Certificate ......................................... 26
     5.06    Statement of Material Adverse Change in Condition .............. 26

                                       ii
<PAGE>


     5.07    Title Defects .................................................. 26
     5.08    Additional Information ......................................... 26
     5.09    Compliance with Laws and Payment of Assessments and Charges .... 26
     5.10    Maintenance of Existence and Good Standing ..................... 26
     5.11    Further Assurances ............................................. 27
     5.12    Initial Expenses of the Bank ................................... 27
     5.13    Subsequent Expenses of the Bank ................................ 27
     5.14    Maintenance of Tangible Property ............................... 28
     5.15    Maintenance of Insurance ....................................... 28
     5.16    Inspection of Tangible Assets/Right of Audit ................... 28
     5.17    Payment of Note and Performance of Obligations ................. 28
     5.18    Borrowing Base ................................................. 28
     5.19    Compliance with Environmental Laws ............................. 28
     5.20    Hazardous Substances Indemnification ........................... 28
     5.21    Properties Not Operated by the Borrower ........................ 29
     5.22    Transactions with Affiliates ................................... 29
     5.23    Leases ......................................................... 29
     5.24    Operation of Borrowing Base Oil and Gas Properties ............. 30
     5.25    Assignments .................................................... 30
     5.26    Change of Purchasers of Production ............................. 30
     5.27    Payment of Taxes, Etc .......................................... 30
     5.28    Notice of Litigation ........................................... 30
     5.29    Notice of Events of Default .................................... 31
     5.30    Notice of Change of Principal Offices .......................... 31
     5.31    Employee Benefit Plans ......................................... 31
     5.32    Production Reports ............................................. 31
     5.33    Operating Accounts ............................................. 31
     5.34    Payment of Obligations ......................................... 31
     5.35    Agreements ..................................................... 31

ARTICLE VI.

     NEGATIVE COVENANTS ..................................................... 32
     6.01    Other Indebtedness ............................................. 32
     6.02    Loans or Advances .............................................. 32
     6.03    Mortgages or Pledges of Assets ................................. 32
     6.04    Sales of Assets ................................................ 32
     6.05    Dividends ...................................................... 33
     6.06    Payment of Accounts Payable .................................... 33
     6.07    Cancellation of Insurance ...................................... 33
     6.08    Investments .................................................... 33
     6.09    Changes in Structure or Business ............................... 33
     6.10    Limitation on Leases ........................................... 33

                                  iii
<PAGE>


     6.11    Pooling or Unitization ......................................... 33
     6.12    Hedge Agreements ............................................... 33
     6.13    Capital Stock of Borrower ...................................... 34
     6.14    Margin Stock ................................................... 34
     6.15    General and Administrative Expenses ............................ 34
     6.16    Minimum Tangible Net Worth ..................................... 34
     6.17    Current Ratio .................................................. 34
     6.18    Debt Service Coverage Ratio .................................... 34

ARTICLE VII.

     EVENTS OF DEFAULT ...................................................... 35
     7.01    Enumeration of Events of Default ............................... 35
     7.02    Rights Upon Unmatured Event of Default ......................... 36
     7.03    Rights Upon Default ............................................ 36
     7.04    Remedies ....................................................... 37
     7.05    Right of Set-off ............................................... 38

ARTICLE VIII.

     MISCELLANEOUS .......................................................... 38
     8.01    Security Interests in Deposits and Right of Offset
             or the Banker's Lien ........................................... 38
     8.02    Survival of Representations, Warranties and Covenants .......... 38
     8.03    Notices and Other Communications ............................... 38
     8.04    Parties in Interest ............................................ 39
     8.05    Renewals and Extensions ........................................ 39
     8.06    No Waiver by the Bank .......................................... 39
     8.07    Waiver, Release, and Indemnification by the Borrower ........... 40
     8.08    GOVERNING LAW .................................................. 40
     8.09    Incorporation of Exhibits and Schedules ........................ 40
     8.10    Survival Upon Unenforceability ................................. 40
     8.11    Rights of Third Parties ........................................ 40
     8.12    Amendments or Modifications .................................... 41
     8.13    Agreement Construed as an Entirety ............................. 41
     8.14    Number and Gender .............................................. 41
     8.15    AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS ...................... 41
     8.16    Controlling Provision Upon Conflict ............................ 41
     8.17    Time, Place and Method of Payments ............................. 41
     8.18    Termination .................................................... 42
     8.19    Non-Application of Chapter 346 of Texas Finance Code ........... 42
     8.20    Counterpart Execution .......................................... 42


                                       iv
<PAGE>


EXHIBITS

EXHIBIT A       Borrowing Base Oil and Gas Properties
EXHIBIT B       Revolving Note
EXHIBIT C       Compliance Certificate
EXHIBIT D       Security Instruments


SCHEDULES

Schedule 4.01   Information Regarding the Borrower and its Subsidiaries
Schedule 4.10   List of Purchasers of Production
Schedule 4.14   Litigation
Schedule 4.15   Existing Indebtedness
Schedule 4.16   Material Commitments
Schedule 4.22   Insurance Certificate
Schedule 4.24   Pipeline Assets and Facilities
Schedule 4.25   Ownership Interests

                                        v
<PAGE>


                                CREDIT AGREEMENT
                                ----------------

       THIS CREDIT  AGREEMENT (this  "Agreement"),  dated effective  November 8,
2001, is by and between TENGASCO, INC., a Tennessee corporation,  TENNESSEE LAND
&  MINERAL  CORPORATION,   a  Tennessee   corporation,   and  TENGASCO  PIPELINE
CORPORATION,  a Tennessee  corporation  (collectively,  the "Borrower") and BANK
ONE, NA, a national banking association (the "Bank").

                               W I T N E S S E T H
                               -------------------

              WHEREAS,  the  Borrower  desires to obtain a loan from the Bank in
order to repay  certain  indebtedness  of the  Borrower  and to satisfy  certain
working capital needs, including the exploration, development and/or acquisition
of oil and gas properties and for general corporate purposes; and

              WHEREAS, the Bank is willing to loan such funds to the Borrower in
accordance with the terms of this Agreement;

              NOW,  THEREFORE,  in  consideration  of the mutual  covenants  and
agreements herein contained, the Bank and the Borrower agree as follows:

                                   ARTICLE I.

                                   DEFINITIONS
                                   -----------

              As used in this  Agreement,  the  following  terms  shall have the
meanings indicated:

              "AFFILIATE"  means,  as applied to any Person,  any other  Person,
directly or  indirectly,  controlling,  controlled  by, or under common  control
with, that Person. For purposes of this definition,  "control" (including,  with
correlative  meanings,  the terms  "controlling,"  "controlled  by," and  "under
common  control  with"),  as  applied  to any  Person,  means  either:  (a)  the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction of the  management  and policies of that Person,  whether  through the
ownership of voting securities,  by contract, or otherwise,  or (b) the legal or
beneficial  ownership of or voting  rights with respect to ten percent  (10%) or
more of the equity interest in such Person.

              "AGREEMENT"  means  this  Credit  Agreement,  as the  same  may be
amended or supplemented from time to time.

              "BANK PARTIES" has the meaning given such term in Section 8.07(B).

              "BORROWING  BASE" means the maximum  Loan amount  supported by the
Borrowing  Base Oil and Gas  Properties,  as determined by the Bank from time to
time in accordance with Section 2.05 of this Agreement.


<PAGE>


              "BORROWING  BASE OIL AND GAS  PROPERTIES"  means those Oil and Gas
Properties of the Borrower that are subject to the liens created by the Security
Instruments  to secure  the  Obligations,  including,  but not  limited  to, the
indebtedness  evidenced by the Note, which Borrowing Base Oil and Gas Properties
are described in Exhibit "A" attached hereto and made a part hereof.

              "BUSINESS DAY" means a day other than a Saturday,  Sunday or legal
holiday for  commercial  banks  under the laws  applicable  to national  banking
associations and those applicable to national association banks.

              "CHANGE OF CONTROL" means an event or series of events,  occurring
without  Bank's prior  written  approval,  by which (i) any reduction of greater
than ten percent (10%) occurs in the aggregate of total  percentage of the stock
of Tengasco,  Inc. that is owned by the officers and directors of Tengasco, Inc.
as shown on Schedule  4.25;  (ii) any change of ownership of the stock in any of
Tengasco, Inc.'s Subsidiaries, including, but without limitation, Tennessee Land
& Mineral Corporation and Tengasco Pipeline Corporation,  resulting in Tengasco,
Inc.  owning  less than one hundred  percent  (100%) of the stock of each of its
Subsidiaries;  or (iii) any change in the board of directors of any Borrower, or
any change of the Person who holds any position of president,  vice-president or
chief financial officer of any of the Borrowers.

              "CLOSING" has the meaning provided in Section 3.01.

              "COMPLIANCE  CERTIFICATE"  means the certificate of the President,
Chief Executive Officer or Chief Financial Officer of the Borrower  submitted to
the Bank from time to time  pursuant  to this  Agreement  and  attesting  to the
financial covenants and stating, to such officer's knowledge,  whether or not an
Event of Default or an Unmatured Event of Default has occurred and is continuing
and, if such an event has occurred,  the actions being taken by the Borrower, to
remedy  such  situation  and that GAAP has been used in the  preparation  of the
Financial Statements,  which certificate shall be in the form attached hereto as
Exhibit "C".

              "CONSOLIDATED  TANGIBLE  NET  WORTH"  means,  as of any  reporting
period, Stockholders' Equity less the sum of:

              (A)    Goodwill,  including any amounts,  however  designated on a
              consolidated  balance sheet of the Borrower and its  Subsidiaries,
              representing  the excess of the purchase  price paid for assets or
              stock acquired over the value assigned thereto on the books of the
              Borrower;

              (B)    Patents, trademarks, trade names, and copyrights;

              (C)    Any amount at which shares of capital stock of the Borrower
              appear as an asset on the Borrower's balance sheet;

                                        2
<PAGE>


              (D)    Loans and advances to stockholders, directors, officers, or
              employees,  to the extent they exceed $10,000.00 in the aggregate;
              and

              (E)    Any other amount in respect of an intangible that should be
              classified  as an asset  on a  consolidated  balance  sheet of the
              Borrower in accordance with GAAP.

              "COPAS"   means  the   Accounting   Procedure   Joint   Operations
Recommended  by the Council of Petroleum  Accountants  Society,  with respect to
onshore operations.

              "CURRENT  ASSETS"  means at any time,  all assets,  that should in
accordance with GAAP, be classified as current assets on a consolidated  balance
sheet of Borrower and its Subsidiaries.

              "CURRENT  LIABILITIES"  means at any time,  all  liabilities  that
should in  accordance  with GAAP,  be  classified  as current  liabilities  on a
consolidated  balance  sheet of the  Borrower  and its  Subsidiaries,  MINUS the
amount  of Loans  under  this  Agreement  which  are  deemed  to be  current  in
accordance with GAAP.

              "CURRENT  RATIO"  means the ratio  derived from  dividing  Current
Assets by Current Liabilities.

              "DEBT  SERVICE  COVERAGE  RATIO"  means  the  ratio  derived  from
dividing  quarterly EBITDA less cash dividend  payments made by Borrower for any
such  quarter by the sum of (i) actual  cash  payments  of  interest  expense of
Borrower  for such  quarter,  (ii)  eight and one third  percent  (8.33%) of the
outstanding  balance of the Loans at the end of such quarter,  and (iii) twenty-
five percent (25%) of the current  maturities of  Indebtedness of Borrower other
than under this Agreement, calculated at the end of such quarter.

              "EBITDA" means, for any reporting period,  Borrower's earnings for
such period,  before deductions for interest,  taxes,  depreciation,  depletion,
amortization and other non-cash charges and addition of non-cash credit.

              "ENVIRONMENTAL  LAWS" means (a) the following federal laws as they
may be cited,  referenced  and amended from time to time: the Clean Air Act, the
Clean Water Act, the Safe Drinking  Water Act, the  Comprehensive  Environmental
Response,  Compensation  and  Liability  Act,  the  Endangered  Species Act, the
Resource  Conservation and Recovery Act, the Occupational Safety and Health Act,
the  Hazardous  Materials  Transportation  Act,  the  Superfund  Amendments  and
Reauthorization Act, the Toxic Substances Control Act, and the Oil Pollution Act
of 1990; (b) any and all  environmental  statutes of any state in which property
of the Borrower is situated,  as they may be cited,  referenced and amended from
time to time; (c) any rules or regulations promulgated under or adopted pursuant
to the above federal and state laws; and (d) any other  federal,  state or local
statute or any requirement,  rule, regulation,  code, ordinance or order adopted
pursuant  thereto,  including,   without  limitation,   those  relating  to  the
generation, transportation, treatment, storage, recycling, disposal, handling or
release of Hazardous Substances.

                                        3
<PAGE>


              "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published  interpretations
thereof.

              "ERISA  AFFILIATE"  means any trade or  business  (whether  or not
incorporated)  which  together  with the  Borrower  would be treated as a single
employer under Section 4001 of ERISA.

              "EVENT OF DEFAULT"  means any of the events  specified  in Section
7.01 of this Agreement.

              "FINANCIAL  STATEMENTS"  means  the  statements  of the  financial
condition of the indicated Person,  on a consolidated  basis, as at the point in
time and for the period  indicated and  consisting of at least a balance  sheet,
income statement and statement of changes in financial  position,  and, when the
foregoing  are  audited,  accompanied  by the  certification  of  such  Person's
independent  certified public accountants and footnotes to any of the foregoing,
all of which  shall be  prepared  in  accordance  with GAAP  applied  on a basis
consistent with that of the preceding year.

              "FLOATING RATE" means a per annum interest rate equal to the Prime
Rate in effect from time to time plus one-quarter  percent (.25%) in the absence
of any Event of Default,  or plus four and one-quarter percent (4.25%) following
and during the continuation of any Event of Default.

              "GAAP" means generally accepted accounting principles,  applied on
a consistent basis, as set forth in Opinions of the Accounting  Principles Board
of the American  Institute of Certified Public  Accountants and/or in statements
of the Financial Accounting  Standards Board and/or their respective  successors
and  which  are  applicable  in the  circumstances  as of the date in  question.
Accounting  principles  are applied on a "consistent  basis" when the accounting
principles  observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.

              "GENERAL  AND  ADMINISTRATIVE  EXPENSES"  means total  expenses of
Borrower,  MINUS (A) lease  operating  expenses,  (B)  dry-hole  costs and other
exploration  expenses,  (C)  depreciation,   depletion,  and  amortization,  (D)
interest  expense,  (E) COPAS overhead,  and (F) severance and ad valorem taxes,
(G) state and federal income taxes.

              "HAZARDOUS SUBSTANCES" means flammables,  explosives,  radioactive
materials,  hazardous  wastes,  asbestos or any  material  containing  asbestos,
polychlorinated   biphenyls  (PCBs),  toxic  substances  or  related  materials,
petroleum and petroleum  products and associated oil or natural gas exploration,
production  and  development  wastes or any  substances  defined  as  "hazardous
substances",  "hazardous  materials",  "hazardous  wastes" or "toxic substances"
under the Comprehensive Environmental Response,  Compensation and Liability Act,
as amended,  the Superfund  Amendments and Reauthorization  Act, as amended, the
Hazardous Materials  Transportation Act, as amended,  the Resource  Conservation
and Recovery Act, as amended,  the Toxic Substances Control Act, as amended,  or
any other Environmental Laws now or hereafter

                                       4
<PAGE>


enacted or  promulgated by any regulatory  authority or  governmental  body, but
only to the extent any such law is or becomes  applicable to the Borrower or any
of its property.

              "HEDGE  AGREEMENT" means any swap agreement,  cap, collar,  floor,
exchange  transaction,  forward  agreement or exchange or  protection  agreement
related to Hydrocarbons or any option with respect to such transaction,  as more
specifically  provided in those certain master swap agreements on  International
Swaps and  Derivatives  Association  forms  and the  schedules  thereto  and any
confirmations thereunder entered into by Borrower with any other Person.

              "HYDROCARBONS" means crude oil,  condensate,  natural gas, natural
gas liquids and other hydrocarbons.

              "INDEBTEDNESS"   means,  as  to  any  Person,  (a)  all  items  of
indebtedness or liability  (other than capital,  surplus,  deferred  credits and
reserves,  as  such)  which  in  accordance  with  GAAP  would  be  included  in
determining  total liabilities as shown on the liability side of a balance sheet
as at the date as of which  Indebtedness is to be determined,  (b)  indebtedness
secured by (or for which the holder of such indebtedness has a right, contingent
or  otherwise,  to be secured by) any  mortgage,  deed of trust,  pledge,  lien,
security  interest,  or other charge or  encumbrance  existing on or encumbering
property owned by the Person whose Indebtedness is being determined,  whether or
not  the  indebtedness   secured  thereby  shall  have  been  assumed,  (c)  all
indebtedness of others which such Person has directly or indirectly  guaranteed,
endorsed  (otherwise  than for  collection or deposit in the ordinary  course of
business),  discounted  with  recourse,  agreed  (contingently  or otherwise) to
purchase or repurchase or otherwise acquire,  or in respect of which such Person
has agreed to supply or  advance  funds  (whether  by way of loan,  purchase  of
securities or capital contribution,  through a commitment to pay for property or
services  regardless of the nondelivery of such property or the nonfurnishing of
such  services or  otherwise),  or in respect of which such Person has otherwise
become directly or indirectly  liable,  contingently  or otherwise,  whether now
existing or hereafter arising, and (d) all leases that, in accordance with GAAP,
should not be reflected on the Borrower's balance sheet.

              "INVESTMENT"  in any Person means any stock,  bond,  note or other
evidence of  Indebtedness  or any other  security  (other than current trade and
customer accounts) of, or loan to, such Person.

              "LAWS" means all ordinances, statutes, rules, regulations, orders,
injunctions,  writs,  or decrees of any  government or political  subdivision or
agency thereof, or any court or similar entity established by any thereof.

              "LEASES"  means oil and gas  leases and all oil,  gas and  mineral
leases constituting any part of the Borrowing Base Oil and Gas Properties.

              "LIMITATION  PERIOD"  means any period  while any  amount  remains
owing on the Note when  interest on such amount,  calculated  at the  applicable
rate prescribed on the Note, plus any fees

                                       5
<PAGE>


payable  hereunder and deemed to be interest under  applicable Law, would exceed
the Maximum Rate.

              "LOAN"  means,  singly,  any  advance by the Bank to the  Borrower
pursuant to this Agreement and "LOANS" means, cumulatively, the aggregate sum of
all money advanced by the Bank to the Borrower pursuant to this Agreement.

              "LOAN  DOCUMENTS"  means this  Agreement,  the Note,  the Security
Instruments,  and all other promissory  notes,  security  agreements,  and other
instruments,  documents, and agreements executed and delivered pursuant to or in
connection with this Agreement, as such instruments,  documents,  and agreements
may be amended, modified, renewed, extended, or supplemented from time to time.

              "LOAN EXCESS" means, at any point in time, the amount,  if any, by
which the  outstanding  balance on the Loans  evidenced  by the Note exceeds the
Revolving Commitment then in effect.

              "MARKETABLE TITLE" means good and defensible title, free and clear
of all mortgages, liens and encumbrances, except for Permitted Encumbrances.

              "MAXIMUM  RATE" means the maximum  rate of  non-usurious  interest
permitted from day to day by applicable law,  including as to Chapter 303 of the
Texas  Finance Code (and as the same may be  incorporated  by reference in other
Texas  statutes),  but otherwise  without  limitation,  that rate based upon the
"indicated weekly rate ceiling."

              "MONTHLY  BORROWING  BASE  REDUCTION"  means  the  amount  of  the
automatic  monthly  reduction to the  Borrowing  Base, as determined by the Bank
from time to time in accordance with Section 2.05 of this Agreement.

              "MULTI-EMPLOYER PLAN" means a plan described in Section 4001(a)(3)
of ERISA which covers employees of the Borrower or any ERISA Affiliate.

              "NISHIWAKI NOTE" means, collectively,  (i) that certain promissory
note dated August 16, 2000 executed by Tengasco Pipeline Corporation in favor of
Nick Nishiwaki  ("NISHIWAKI")  for the principal  amount of Two Million  Dollars
($2,000,000.00),  (ii) that certain Loan Agreement dated August 16, 2000 between
Tengasco  Pipeline  Corporation  and  Nishiwaki,  (iii) that certain  Throughput
Agreement  dated  August 16, 2000  between  Tengasco  Pipeline  Corporation  and
Nishiwaki,  (iv) that  certain  letter  agreement  dated April 20, 2001  between
Tengasco  Pipeline  Corporation and Nishiwaki,  and (v) that certain  promissory
note dated August 16, 2000 executed by Tengasco Pipeline Corporation in favor of
Morita  Properties,  Inc.  ("MORITA")  for the principal  amount of Five Hundred
Thousand  Dollars  ($500,000.00)  which was assigned by Morita to Nishiwaki  per
that certain agreement dated January 4, 2001 between Morita and Nishiwaki,  (vi)
that certain Loan  Agreement  dated  August 16, 2000 between  Tengasco  Pipeline
Corporation and Morita,

                                       6
<PAGE>


the benefits and  obligations  of which were assigned by Morita to Nishiwaki per
that certain  agreement dated January 4, 2001 between Morita and Nishiwaki,  and
(vii) that certain  Throughput  Agreement dated August 16, 2000 between Tengasco
Pipeline  Corporation  and Morita,  the benefits and  obligations  of which were
assigned by Morita to Nishiwaki per that certain agreement dated January 4, 2001
between Morita and Nishiwaki.

              "NOTE" means the Revolving  Note, and any extension,  renewal,  or
rearrangement of, or substitute for, such Note.

              "OBLIGATIONS" means all obligations, indebtedness, and liabilities
of the Borrower to the Bank, now existing or hereafter arising,  whether direct,
indirect,  related,  unrelated,  fixed,  contingent,  liquidated,  unliquidated,
joint,  several,  or joint  and  several,  including,  without  limitation,  the
obligations,  indebtedness, and liabilities of the Borrower under this Agreement
and the other  Loan  Documents  and any Hedge  Agreement  entered  into  between
Borrower and Bank, and all interest accruing thereon and all attorneys' fees and
other  expenses  incurred  in  the  administration,  enforcement  or  collection
thereof.

              "OIL AND GAS PROPERTIES"  means fee,  leasehold or other interests
in or under mineral estates or oil, gas and other liquid or gaseous  hydrocarbon
leases with  respect to  properties  situated in the United  States,  including,
without limitation,  overriding royalty and royalty interests,  leasehold estate
interests,  net profits interests,  production payment interests and mineral fee
interests,  together with  contracts  executed in  connection  therewith and all
tenements,  hereditaments,  appurtenances  and  properties,  real  or  personal,
appertaining, belonging, affixed or incidental thereto.

              "PBGC" shall mean the Pension Benefit Guaranty  Corporation or any
entity succeeding to any or all of its functions under ERISA.

              "PERMITTED   ASSET  SALES"  means  sales,   leases,   assignments,
transfers or disposals of, in one or any series of related transactions,  all or
any  portion  of  Borrower's:  (a)  equipment,  whether  now owned or  hereafter
acquired,  including transfers to Subsidiaries,  which, in the aggregate, do not
exceed  $250,000.00  in any  rolling  twelve  month  period,  or (b) Oil and Gas
Properties  that  neither are  covered by any of the  Security  Instruments  nor
contain any proved oil and gas reserves.

              "PERMITTED ENCUMBRANCES" means:

              (A)    Liens for taxes, assessments,  or similar charges, incurred
              in the  ordinary  course  of  business  that  are  not yet due and
              payable;

              (B)    Liens of mechanics, materialmen, warehousemen, carriers, or
              other like liens,  securing  obligations  incurred in the ordinary
              course of business that are not yet due and payable;

                                       7
<PAGE>


              (C)    Pledges  or  deposits  in  connection  with  or  to  secure
              workmen's compensation,  unemployment insurance, pensions or other
              employee benefits;

              (D)    Encumbrances consisting of covenants,  zoning restrictions,
              rights, easements,  liens or other restrictions on the use of real
              property,  none  of  which  materially  impairs  the  use of  such
              property by the  Borrower in the  operation of its  business,  and
              none of which is violated in any  material  respect by existing or
              proposed operations;

              (E)    Liens of operators and/or co-working  interest owners under
              joint  operating  agreements or similar  contractual  arrangements
              with respect to the Borrower's  proportionate share of the expense
              of exploration,  development and operation of oil, gas and mineral
              leasehold or fee  interests  owned  jointly  with  others,  to the
              extent that same relate to sums not yet due;

              (F)    Liens securing surety or other bonds required in the normal
              course of business not to exceed  $25,000.00  in the  aggregate at
              any time in effect;

              (G)    The  following,  if the validity or amount thereof is being
              contested in good faith by appropriate and lawful proceedings,  so
              long as levy and  execution  thereon have been stayed and continue
              to be stayed and they do not, in the aggregate, materially detract
              from the value of the property of the Borrower or any  Subsidiary,
              or  materially  impair  the use  thereof in the  operation  of its
              business:

                     (1)    Claims or liens for taxes,  assessments,  or charges
                     due and payable and subject to interest or penalty;

                     (2)    Claims, liens, and encumbrances upon, and defects of
                     title  to,  real  or  personal   property,   including  any
                     attachment  of  personal  or real  property  or other legal
                     process prior to adjudication of a dispute on the merits;

                     (3)    Claims   or   liens   of   mechanics,   materialmen,
                     warehousemen, carriers, or other like liens; and

                     (4)    Adverse judgments on appeal.

              (H)    Liens securing payment and performance of the Obligations;

              (I)    Liens securing purchase money  obligations  included in the
              definition of Permitted  Indebtedness  if such liens encumber only
              the  property  for  which  such  purchase  money   obligation  was
              incurred; and

              (J)    Inchoate liens in respect of royalty or overriding  royalty
              owners.

                                       8
<PAGE>


              "PERMITTED  HEDGE  AGREEMENT"  means  any  Hedge  Agreement  which
Borrower  enters into with or through the Bank or any Affiliate  thereof or with
any other Person reasonably  acceptable to the Bank, and any other confirmations
which  Borrower  may  hereafter  enter  into  with or  through  the  Bank or any
Affiliate thereof or any other Person reasonably acceptable to the Bank.

              "PERMITTED INDEBTEDNESS" means:

              (A)    The Loans;

              (B)    Loans by the Bank under other credit arrangements;

              (C)    Unsecured current accounts payable incurred in the ordinary
              course  of  business  which  are (i) not  overdue,  or (ii)  being
              contested in good faith by appropriate  proceedings,  or (iii) the
              subject of usual and customary review and evaluation;

              (D)    Loans,  advances or  extensions  of credit from  suppliers,
              contractors  or other  Persons who are not  Affiliates of Borrower
              under  applicable  contracts  or  agreements  in  connection  with
              Borrower's oil and gas  exploration  and  development  activities,
              which are not  overdue  or are being  contested  in good  faith by
              appropriate proceedings;

              (E)    Letters  of  credit or  performance  bonds  required  to be
              obtained by the  Borrower in the normal  course of its business to
              assure the proper  plugging and abandonment of oil or gas drilling
              or  production  locations  or bonds  required by any  governmental
              agency or  instrumentality  in the normal course of the Borrower's
              business; and

              (F)    Purchase  money  obligations  of  the  Borrower  of  up  to
              $100,000 at any time for the  purchase of equipment so long as the
              purchase money  obligations do not exceed the fair market value of
              the equipment purchased therewith.

              "PERSON" means an individual,  company, corporation,  partnership,
joint venture,  limited liability company,  trust,  association,  unincorporated
organization or a government or any agency or political subdivision thereof.

              "PLAN"  means,  at any time,  any  employee  benefit plan which is
covered by ERISA and in respect of which the Borrower or any ERISA  Affiliate is
(or, if such plan were  terminated  at such time,  would under  Section  4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

                                       9
<PAGE>


              "PRIME  RATE"  means a rate per annum  equal to the prime  rate of
interest  announced from time to time by the Bank (which is not  necessarily the
lowest  rate  charged  to any  customer),  changing  when and as said prime rate
changes.

              "PROHIBITED  TRANSACTION"  means  any  transaction  set  forth  in
Section 406 of ERISA or Section  4975 of the Internal  Revenue Code of 1986,  as
amended from time to time.

              "PROVED  RESERVES"  means the  estimated  quantities of crude oil,
condensate, natural gas liquids and natural gas which geological and engineering
data  demonstrate  with  reasonable  certainty  to  be  recoverable  by  primary
producing  mechanisms in future years from known reservoirs  underlying lands or
interests therein  constituting Oil and Gas Properties,  under existing economic
and operating  conditions.  Reserves which can be produced  economically through
application of improved  recovery  techniques  (i.e.,  fluid  injection) will be
included in Proved  Reserves when  successful  testing by a pilot project or the
operation  of an installed  program in the  reservoir  provides  support for the
engineering  analysis on which the pilot project or installed program was based.
In general,  the  economic  productivity  of the  estimated  proved  reserves is
supported by actual  production  or a conclusive  formation  test;  however,  in
certain  instances  proved reserves are assigned to reservoirs on the basis of a
combination  of electrical  and other type logs and core analyses which indicate
these reservoirs are analogous to similar reservoirs in the same field which are
producing or have demonstrated the ability to produce on a formation test.

              "REPORTABLE  EVENT"  means any of the  events set forth in Section
4043 of ERISA.

              "REQUEST FOR ADVANCE" means the written request by Tengasco,  Inc.
for an advance by the Bank pursuant to this Agreement, which Request for Advance
shall be signed by an authorized  officer of Tengasco,  Inc. and shall include a
statement  of the amount  requested to be  advanced,  the date of the  requested
advance  and such other  information  as the Bank in its  reasonable  discretion
deems necessary.

              "REVOLVING  COMMITMENT" means the obligation of the Bank,  subject
to the provisions of this Agreement and existing only through the Revolving Loan
Termination Date, to advance to the Borrower funds in an amount not to exceed at
any one time  outstanding  the lesser of: (a) the Borrowing Base then in effect,
or (b) the Revolving Commitment Limit.

              "REVOLVING  COMMITMENT  LIMIT"  means  $10,000,000.00  as  of  the
Closing,  but such amount may be  increased  by the Bank in its sole  discretion
from  time to time  with the  agreement  of the  Borrower  should  the  Borrower
contribute  additional  Oil and Gas  Properties of the Borrower to the Borrowing
Base Oil and Gas Properties in accordance with Section 2.11 hereof or should the
Borrowing  Base, as determined in accordance with Section 2.05, ever exceed such
amount.

              "REVOLVING LOAN" means the loan made pursuant to Section 2.01.

              "REVOLVING LOAN TERMINATION DATE" means November 8, 2004.

                                       10
<PAGE>


              "REVOLVING  NOTE" means the  promissory  note in the original face
amount  of  $35,000,000.00  dated of even  date  herewith  made by the  Borrower
payable to the order of the Bank, in  substantially  the form attached hereto as
Exhibit "B,"  together with all  deferrals,  renewals,  extensions,  amendments,
modifications or  rearrangements  thereof,  which promissory note shall evidence
certain advances to the Borrower by the Bank pursuant to Section 2.01 hereof.

              "SECURITY INSTRUMENTS" means the security instruments described on
Exhibit "D," in form and substance  satisfactory  to the Bank, to be executed by
Borrower  pursuant  to  Section  3.01,  and  any and all  other  instruments  or
documents  hereafter  executed in connection with or as security for the payment
of the Note.

              "STOCKHOLDERS'  EQUITY"  means,  at  any  time,  the  sum  of  the
following  accounts set forth on a  consolidated  balance sheet of the Borrower,
prepared in accordance with GAAP: (A) the par or stated value of all outstanding
capital stock; (B) capital surplus; and (C) retained earnings.

              "SUBSIDIARY"  means,  as to any Person,  any  corporation in which
such Person,  directly or indirectly  through its  Subsidiaries,  owns more than
fifty  percent  (50%) of the stock of any class or  classes  having by the terms
thereof the ordinary  voting power to elect a majority of the  directors of such
corporation, and any partnership, association, joint venture, or other entity in
which such Person,  directly or indirectly  through its  Subsidiaries,  has more
than a fifty percent (50%) equity interest at the time.

              "TRANSFER  ORDER LETTERS" means the letters in lieu of division or
transfer orders, in form acceptable to the Bank.

              "UNMATURED  EVENT OF DEFAULT" means any event or occurrence  which
solely with the lapse of time or the giving of notice or both will ripen into an
Event of Default.

              UNDEFINED TERMS. Undefined financial accounting terms used in this
Agreement shall be defined according to GAAP.

                                   ARTICLE II.

                                    THE LOAN
                                    --------

              2.01   THE  REVOLVING   LOAN.   Upon  the  terms  and   conditions
(including, without limitation, the right of the Bank to terminate the Revolving
Commitment  hereunder  upon an Event of Default or to suspend its  obligation to
make advances under the Revolving Commitment upon an Unmatured Event of Default)
and relying on the representations  and warranties  contained in this Agreement,
the Bank  agrees,  for a period  from and  after  the date  hereof  through  the
Revolving Loan  Termination  Date, to make advances to the Borrower from time to
time following  receipt of a Request for Advance at least one Business Day prior
to such  requested  advance,  in  such  amounts  as the  Borrower  may  request;
PROVIDED, HOWEVER, each such advance shall be in an amount of not less

                                       11
<PAGE>


than  $100,000.00  and in an integral  multiple of $10,000.00  and the aggregate
principal  amount of all advances  made pursuant to this Section 2.01 and at any
one time outstanding shall not exceed the Revolving Commitment.

              Through the Revolving Loan Termination  Date, the Borrower may use
this revolving credit by borrowing, prepaying and reborrowing, all in accordance
with the terms and  conditions of this  Agreement.  The  borrowings  made by the
Borrower  pursuant to the  Revolving  Commitment  shall be solely  requested  by
Tengasco,  Inc.  through a Request for Advance and all  advances to the Borrower
may be made by the Bank to Tengasco,  Inc's account at the  principal  office of
the Bank in Houston,  Texas. All Loans shall be evidenced by the Revolving Note.
The entire  principal  amount of the Revolving Note is due on the Revolving Loan
Termination Date.

              2.02   ADVANCES  AND  PAYMENTS OF  PRINCIPAL  UNDER THE  REVOLVING
NOTE.  Each time an advance is made against or payment is made on the  Revolving
Note,  the  Bank  is  hereby  irrevocably  authorized  by the  Borrower  to make
appropriate  entries  of such in its  records in  accordance  with the usual and
customary practices of accounting for advances and payments on notes;  provided,
however,  the failure of the Bank to do so shall not relieve the Borrower of its
correct liability hereunder or under the Revolving Note.

              The aggregate unpaid amount of advances reflected by the notations
by the Bank on its records or the ledger sheets  affixed to the  Revolving  Note
shall be deemed rebuttably presumptive evidence of the principal amount owing on
the  Revolving  Note.  The  liability  for  payment of  principal  and  interest
evidenced by the Revolving Note shall be limited to principal  amounts  actually
advanced to the Borrower and  outstanding  under this  Agreement and interest on
such amounts calculated in accordance with this Agreement. Interest provided for
in the  Revolving  Note and herein shall be  calculated  on unpaid sums actually
advanced and outstanding  under the Revolving Note pursuant to the terms of this
Agreement and only for the period from the date or dates of such advances  until
repayment.

                  2.03 PAYMENTS OF INTEREST UNDER THE REVOLVING NOTE. Subject to
the terms and  provisions of this  Agreement,  interest on the  Revolving  Loan,
calculated at the Floating Rate,  shall be due and payable monthly as it accrues
beginning  December 1, 2001, and continuing  thereafter on the first day of each
succeeding  calendar  month while any amount remains owing on the Revolving Note
and at the  Revolving  Loan  Termination  Date,  the  interest  payment  in each
instance  to be that  which has been  earned  and  remains  unpaid.  The rate of
interest  charged on the  Revolving  Loan shall be  adjusted,  effective  on the
effective date of each change in the Prime Rate,  and in the ordinary  course of
business the Bank shall send written notice to the Borrower that a change in the
Prime Rate has occurred.

              2.04   GENERAL   PROVISIONS   RELATING  TO  INTEREST.   All  Loans
hereunder  and  outstanding  from time to time shall bear  interest  at the rate
prescribed in the Revolving  Note, as  applicable,  calculated on the basis of a
year of three  hundred  sixty  (360) days from the date of  advance  to, but not
including, the date of repayment.

                                       12
<PAGE>


              It is the intention of the parties hereto to comply  strictly with
the usury Laws of the State of Texas and the United  States of America  and,  in
this connection, there shall never be collected, charged or received on any sums
advanced  hereunder  interest in excess of the  Maximum  Rate.  For  purposes of
Chapter 303 of the Texas Finance Code, as amended,  the Borrower agrees that the
maximum rate to be charged  shall be the  "indicated  (weekly)  rate ceiling" as
defined  in said  Chapter,  provided  that the Bank may also rely to the  extent
permitted  by  applicable  Laws of the  State of Texas or the  United  States of
America, on alternative maximum rates of interest under other applicable Laws of
the State of Texas or the United  States of America  applicable  to the Bank, if
greater.  Notwithstanding anything herein or in the Note to the contrary, during
any Limitation  Period,  the interest rate to be charged on amounts evidenced by
the Note shall be the Maximum  Rate and the  obligation  of the Borrower for any
fees payable  hereunder and deemed to be interest under  applicable Law shall be
suspended.  During any period or periods of time following a Limitation  Period,
to the extent  permitted by applicable  Laws of the State of Texas or the United
States of America, the interest rate to be charged hereunder shall remain at the
Maximum  Rate  until such time as there has been paid to the Bank (a) the amount
of  interest  in excess of the  Maximum  Rate that the Bank would have  received
during the  Limitation  Period had the  interest  rate  remained at the relevant
rates  specified in the Note, and (b) all interest and fees otherwise due to the
Bank but for the effect of such Limitation Period.

              If under any  circumstances the aggregate amounts paid on the Note
or under this  Agreement  include  amounts which by Law are deemed  interest and
which would exceed the amount permitted if the Maximum Rate were in effect,  the
Borrower  stipulates that such payment and collection will have been and will be
deemed to have been, to the extent  permitted by applicable Laws of the State of
Texas or the United States of America,  the result of mathematical  error on the
part of both the Borrower and the Bank, and the Bank shall  promptly  refund the
amount of such excess (to the extent only of such  interest  payments  above the
Maximum  Rate which  could  lawfully  have been  collected  and  retained)  upon
discovery of such error by the Bank or notice thereof from the Borrower.

              2.05   BORROWING BASE DETERMINATION. The initial Borrowing Base is
hereby  established at  $10,000,000.00.  Subject to the other provisions of this
Agreement, the initial Monthly Borrowing Base Reduction is hereby established at
$0.00. If the next Borrowing Base  redetermination has not occurred on or before
February 1, 2002,  the Monthly  Borrowing  Base Reduction will be established as
$200,000.00  commencing  February 1, 2002.  On or before  December 1, 2002,  the
Borrower  shall  furnish  to the Bank  information  sufficient  to  update to an
effective  date of  November  1, 2001,  the most  recent  petroleum  engineering
reports  provided to the Bank prior to Closing  relative to the Proved  Reserves
attributable to the Borrowing Base Oil and Gas Properties.  Upon receipt of such
report,  the Bank shall, in the normal course of business,  make a determination
of the  Borrowing  Base and the Monthly  Borrowing  Base  Reduction  which shall
become effective upon written  notification  from the Bank to the Borrower,  and
which, subject to the other provisions of this Agreement,  shall be the basis on
which the Borrowing Base shall thereafter be calculated until the effective date
of the next redetermination of the Borrowing Base and the Monthly Borrowing Base
Reduction as set forth in this Section. Thereafter, on or before each June

                                       13
<PAGE>


1 and December 1 until the Revolving Loan  Termination  Date, the Borrower shall
furnish to the Bank a report,  in form and substance  satisfactory  to the Bank,
which  report  shall set forth,  as of each  preceding  May 1 or  November 1, as
applicable,  the Proved Reserves  attributable to the Borrowing Base Oil and Gas
Properties.  Each  report to be  provided  on or  before  each June 1 shall be a
complete report  relating to the Proved  Reserves  attributable to the Borrowing
Base Oil and Gas  Properties  prepared by an independent  petroleum  engineer or
firm of  engineers  reasonably  satisfactory  to the  Bank.  Each  report  to be
provided on or before each December 1 shall simply update the previous  complete
report,  and may be  prepared  by the  Borrower's  own  engineers  and  shall be
certified by the President,  Chief Executive  Officer or Chief Financial Officer
of the Borrower. Upon receipt of each such report, the Bank shall, in the normal
course of business,  make a determination  of the Borrowing Base and the Monthly
Borrowing Base Reduction which shall become effective upon written  notification
from the Bank to the  Borrower,  and which,  subject to the other  provisions of
this Agreement,  shall be the basis on which the Borrowing Base shall thereafter
be  calculated  until  the  effective  date of the next  redetermination  of the
Borrowing  Base and the Monthly  Borrowing  Base  Reduction as set forth in this
Section  2.05.  The Bank may  redetermine  the  Borrowing  Base and the  Monthly
Borrowing  Base  Reduction,   at  any  time,  and  from  time  to  time,   which
redetermination  shall become effective upon written  notification from the Bank
to the Borrower and which,  subject to the other  provisions of this  Agreement,
shall be the basis on which the  Borrowing  Base shall  thereafter be calculated
until the effective date of the next  redetermination  of the Borrowing Base and
the Monthly Borrowing Base Reduction, as set forth in this Section. The Bank may
require the Borrower to provide a report  prepared by an  independent  petroleum
engineer or firm of engineers reasonably  satisfactory to the Bank regarding the
Proved Reserves attributable to the Borrowing Base Oil and Gas Properties at any
time upon ninety (90) days advance notice to the Borrower.

              The Borrowing Base shall  represent the Bank's  determination,  in
accordance with its customary lending practices, of the maximum loan amount with
respect  to  the  Borrowing  Base  Oil  and  Gas  Properties  and  the  Borrower
acknowledges,  for purposes of this Agreement, such determination by the Bank as
being the maximum  loan amount with  respect to the  Borrowing  Base Oil and Gas
Properties.  In making any redetermination of the Borrowing Base, the Bank shall
apply the  parameters  then  generally  being utilized by the Bank for Borrowing
Base  redeterminations for other similarly situated borrowers.  The Borrower and
the  Bank  acknowledge  that  (a)  due to the  uncertainties  of the oil and gas
extraction process, the Borrowing Base Oil and Gas Properties are not subject to
evaluation  with a high degree of accuracy  and are subject to  potential  rapid
deterioration  in  value,  and (b) for  this  reason  and the  difficulties  and
expenses  involved in liquidating and collecting  against the Borrowing Base Oil
and Gas  Properties,  the Bank's  determination  of the maximum loan amount with
respect to the Borrowing Base Oil and Gas Properties contains an equity cushion,
which  equity  cushion is  acknowledged  by the  Borrower as  essential  for the
adequate protection of the Bank.

              2.06   MANDATORY  PREPAYMENT  OF THE NOTE.  In the event  that the
Bank determines that a Loan Excess exists, the Borrower shall  immediately,  but
in no event later than thirty  (30) days  following  notice from the Bank of any
such scheduled or non-scheduled Borrowing Base

                                       14
<PAGE>


determination,  (i) prepay the principal of the  Revolving  Note in an aggregate
amount at least equal to such Loan Excess or (ii) add to the Borrowing  Base Oil
and Gas Properties  additional Oil and Gas Properties of the Borrower sufficient
in value, as determined by the Bank in its sole  discretion  pursuant to Section
2.05, to increase the Borrowing Base to equal the unpaid principal amount of the
Revolving Note.  Notwithstanding the foregoing  provisions of this section,  the
Borrower  shall pay the amount of any Loan  Excess  that would  result  from the
application  of each Monthly  Borrowing Base Reduction on or before the day that
such Monthly Borrowing Base Reduction becomes applicable.

              2.07   ADVANCES TO SATISFY  OBLIGATIONS OF THE BORROWER.  The Bank
may, but shall not be obligated  to, make  advances  hereunder and apply same to
the satisfaction of any condition,  warranty,  representation or covenant of the
Borrower  contained  in this  Agreement,  and the funds so advanced  and applied
shall be part of the Loan proceeds  advanced  under this Agreement and evidenced
by the Revolving Note.

              2.08   ASSIGNMENT   OF   PRODUCTION.   Certain  of  the   Security
Instruments  covering  the  Borrowing  Base Oil and Gas  Properties  contain  an
assignment  unto and in favor of the  Bank of all oil,  gas and  other  minerals
produced and to be produced from or  attributable  to the Borrowing Base Oil and
Gas Properties  together with all of the revenues and proceeds  attributable  to
such  production,  and such Security  Instruments  further provide that all such
revenues  and proceeds  which may be so  collected  by the Bank  pursuant to the
assignment  shall be applied to the payment of the Note and the  satisfaction of
all other Indebtedness to be secured by such Security Instruments.  The Borrower
hereby appoints the Bank its agent and attorney-in-fact until this Agreement has
been  terminated  in  accordance  with  Section  8.18  hereof  for  purposes  of
completing the letter transfer orders  delivered to the Bank pursuant to Section
3.01 hereof which power is coupled with an interest and is not revocable.

              2.09   COMMITMENT FEE. As consideration  for the commitment of the
Bank to make Loans to the Borrower  through the Revolving Loan  Termination Date
pursuant to this  Agreement,  the Borrower agrees to pay to the Bank within five
(5) Business  Days of receipt of the Bank's  statement  as to quarterly  periods
ending March 31, June 30,  September 30 and December 31 of each year (except the
first  period  shall be for a period of time from the  Closing to  December  31,
2001)  during  the  period  commencing  on the  date  of this  Agreement  to and
including  the  Revolving  Loan  Termination  Date  and  at the  Revolving  Loan
Termination  Date,  a fee equal  one-half of one  percent  (1/2 of 1%) per annum
(computed  on the  basis of 360)  multiplied  by an  amount  equal to the  daily
average excess, if any, of the Revolving Commitment over the aggregate principal
amount  outstanding  on the Note,  throughout  the period  from the date of this
Agreement or previous  calculation  date provided above,  whichever is later, to
the relevant  calculation  date or the Revolving Loan  Termination  Date, as the
case may be.

              2.10   FACILITY FEE. As  consideration  for the  commitment of the
Bank to make Loans to the  Borrower  pursuant to this  Agreement,  the  Borrower
shall pay to the Bank a facility  fee of one and one fourth  percent (1 1/4%) of
the amount of the initial Borrowing Base established in

                                       15
<PAGE>


Section  2.05  hereof.  Any time the  Borrowing  Base is  increased  pursuant to
Section 2.05,  an  additional  facility fee shall be paid to Bank by Borrower in
the amount of  three-fourths  of one  percent  (3/4 of 1%) of any such  increase
above the  highest  Borrowing  Base that was in effect at any time prior to such
increase.

              2.11   ADMINISTRATIVE FEE. As further consideration for the Bank's
obligations  pursuant  to  this  Agreement,   Borrower  shall  pay  to  Bank  an
administrative fee of $15,000.00 on each anniversary of the date of Closing, and
on the Revolving Loan Termination Date.

              2.12   ADDITION/DELETION  OF BORROWING BASE OIL & GAS  PROPERTIES.
The Borrower may, from time to time upon fifteen (15) days prior written  notice
to the  Bank,  propose  to add Oil and Gas  Properties  of the  Borrower  to the
Borrowing  Base Oil and Gas  Properties.  Any such  proposal  to add Oil and Gas
Properties of the Borrower to the Borrowing Base Oil and Gas Properties shall be
accompanied by an engineering report applicable to such properties that conforms
to the  requirements  of Section 2.05 and evidence  sufficient to establish that
the Borrower has Marketable  Title to such Oil and Gas Properties,  and any such
addition  shall  become  effective  at such  time as:  (a) the Bank has made its
determination  of the amount by which the  Borrowing  Base would be increased as
the result of such  addition  and (b) the  conditions  set forth in Article  III
hereof,  to the  extent  they  are  applicable  to such  additional  Oil and Gas
Properties of the Borrower, have been satisfied.

              2.13   ADJUSTMENT  TO  REVOLVING  COMMITMENT  LIMIT.  Borrower may
propose not more than twice  during any rolling  twelve  (12) month  period,  in
addition to the Borrowing Base redetermination allowed pursuant to Section 2.05,
to increase the Borrowing  Base by adding  additional  Oil and Gas Properties to
the Borrowing Base Oil and Gas Properties pursuant to Section 2.12, Borrower may
also request that Bank increase the amount of the Revolving Commitment Limit. At
any time that Borrower makes such a request it shall promptly  provide Bank with
such financial  information as Bank may request to assist the Bank in evaluating
such request.  Following the receipt of such information from Borrower, the Bank
shall,  in the normal  course of its  business,  make a  redetermination  of the
Revolving   Commitment   Limit,   which  shall  become  effective  upon  written
notification  from the Bank to Borrower of the new Revolving  Commitment  Limit.
The Borrower may, on a quarterly  basis,  upon written notice to the Bank, amend
the  definition  of the  Revolving  Commitment  Limit by reducing the amount set
forth in such definition.  Upon such reduction,  the Bank shall not be obligated
to extend Loans in excess of such reduced  Revolving  Commitment  Limit.  If and
when the Bank increases the Revolving  Commitment  Limit at Borrower's  request,
the commitment  fee, as determined  pursuant to Section 2.09 of this  Agreement,
shall be  calculated  using such  increased  amount  for all of the  calculation
period in which such Revolving Commitment Limit was increased.

                                       16
<PAGE>


                                  ARTICLE III.

                                   CONDITIONS
                                   ----------

              The  obligation  of the Bank to make the Loans is  subject  to the
following conditions precedent:

              3.01   CONDITIONS  TO THE CLOSING.  The  Borrower  shall have duly
delivered  or  caused  to be  delivered  to  the  Bank,  prior  to  the  initial
disbursement of the Loans (the "Closing"), the following:

              (A)    The Revolving Note;

              (B)    Each of the Security Instruments;

              (C)    Transfer Order Letters  applicable to the production of oil
              and gas from the Borrowing Base Oil and Gas Properties;

              (D)    The results of a Uniform Commercial Code search showing all
              financing  statements  and other  documents or instruments on file
              against the Borrower in the Offices of the Secretaries of State of
              the State of  Tennessee,  the State of  Kansas  and each  State in
              which any of the Borrowing Base Oil and Gas Properties are located
              or deemed to be located, and the counties and/or parishes in which
              the  Borrower  maintains  its  principal  place of business and in
              which  any of the  Borrowing  Base  Oil  and  Gas  Properties  are
              located, such search to be as of a date no more than ten (10) days
              prior to the date of Closing.

              (E)    A  certified  (as  of the  date  of the  Closing)  copy  of
              resolutions of each Borrower's Board of Directors  authorizing the
              execution,  delivery, and performance of this Agreement, the Note,
              and each other document to be delivered pursuant hereto;

              (F)    A  certificate  (dated  the  date of the  Closing)  of each
              Borrower's corporate secretary as to the incumbency and signatures
              of the officers of the Borrower signing this Agreement,  the Note,
              and each other document to be delivered pursuant hereto;

              (G)    A copy, certified as of the most recent date practicable by
              the  Secretary  of  State  of  the  state  in  which  Borrower  is
              incorporated,  of each  Borrower's  certificate of  incorporation,
              together  with a  certificate  (dated the date of the  Closing) of
              each  Borrower's  corporate  secretary to the effect that true and
              correct copies of the articles of incorporation and bylaws of such
              Borrower   are  attached   thereto  and  that  such   articles  of
              incorporation and bylaws have not been amended;

                                       17
<PAGE>


              (H)    Certificates,  as of the most recent dates practicable,  of
              the aforesaid Secretaries of State, the Secretary of State of each
              state  in  which  each   Borrower  is   qualified   as  a  foreign
              corporation,  and the department of revenue or taxation of each of
              the foregoing states, as to the good standing of the Borrower;

              (I)    A Compliance Certificate, dated the date of the Closing;

              (J)    Evidence  satisfactory to the Bank, in its sole discretion,
              that as of the date of Closing, all existing  Indebtedness owed by
              Borrower,  including,  without  limitation,  the debt described on
              Schedule  4.15  attached  hereto  has been  fully  and  completely
              repaid.

              (K)    Payment  of the  facility  fee  pursuant  to  Section  2.10
              hereof;

              (L)    Payment of the  Bank's  attorneys'  fees upon  receipt of a
              reasonably detailed invoice pursuant to Section 5.12 hereof; and

              (M)    A legal opinion of outside  counsel to the Borrower in form
              and substance  reasonably  satisfactory to the Bank confirming the
              legal  conclusions  expressed in  Borrower's  representations  set
              forth in Sections 4.01 through 4.03, 4.11, 4.20 and 4.21.

              3.02   DOCUMENTS REQUIRED FOR SUBSEQUENT DISBURSEMENTS.  As of the
time of funding any  additional  advances to Borrower that have been approved by
the Bank pursuant to Section 2.01 and are made in conjunction  with the addition
of Oil and Gas  Properties  owned by the Borrower to the Borrowing  Base Oil and
Gas  Properties,  the Borrower  shall have duly  delivered to the Bank:  (i) the
Security  Instruments  that are  necessary  or  appropriate,  in the  reasonable
opinion of the Bank,  relating to such additional Oil and  Properties,  and (ii)
Transfer Order Letters applicable to the production of oil and gas from the such
additional Borrowing Base Oil and Gas Properties.

              3.03   GENERAL CONDITIONS TO ALL DISBURSEMENTS. At the time of the
Closing and each subsequent disbursement:

              (A)    No Event of Default shall have occurred and be  continuing,
              and no Unmatured Event of Default shall have occurred;

              (B)    The representations and warranties  contained in Article IV
              of this  Agreement  shall  be true  and  correct  in all  material
              respects as though such  representations  and  warranties had been
              made on such date, except such as are expressly limited to a prior
              date,  which  shall  have been true and  correct  in all  material
              respects as of such prior date;

                                       18
<PAGE>


              (C)    The  Bank  shall  have  been,  and  shall  continue  to be,
              satisfied,  in its sole good faith  discretion,  that the Borrower
              holds   Marketable  Title  to  the  Borrowing  Base  Oil  and  Gas
              Properties,  and that such ownership  includes  record title to an
              undivided net revenue  interest in the  production  from each such
              Borrowing Base Oil and Gas Property that is not less than, as well
              as an undivided  working  interest in each  Borrowing Base Oil and
              Gas  Property  that  is  not  greater  than  (unless  there  is  a
              corresponding  increase in the net revenue interest  attributed to
              such party  therein),  the net  revenue  interest  therein and the
              working interest therein, respectively, attributed to the Borrower
              on Exhibit "A," subject to the limitations and  qualifications  on
              such exhibit (or attributed to Borrower in any Security Instrument
              applicable  to any Oil  and Gas  Property  that  is  added  to the
              Borrowing  Base  Oil and Gas  Properties  in  connection  with any
              subsequent funding after the Closing);

              (D)    No  material  adverse  change  shall have  occurred  in the
              Borrower's  financial  condition  since  the  date  of the  latest
              Financial  Statements  provided to the Bank prior to its execution
              of this  Agreement  and pursuant to Sections 5.03 and 5.04 hereof;
              and

              (E)    All of the Security Instruments shall have remained in full
              force and effect.

              3.04 LEGAL MATTERS. At the time of the Closing and each subsequent
disbursement,   all  legal  matters   incidental  thereto  shall  be  reasonably
satisfactory to the Bank's designated legal counsel.

                                   ARTICLE IV.

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

              To induce  the Bank to enter into this  Agreement  and to make the
Loans hereunder, Borrower represents and warrants to the Bank that:

              4.01   EXISTENCE. Each Borrower is a corporation,  duly organized,
legally existing, and in good standing under the Laws of the State of Tennessee;
each Subsidiary is a corporation duly organized,  validly existing,  and in good
standing  under the Laws of its state of  incorporation;  the  Borrower  and its
Subsidiaries  have the lawful power to own their properties and to engage in the
businesses  they conduct,  and each is duly  qualified and in good standing as a
foreign  corporation  in the  jurisdictions  wherein the nature of the  business
transacted by it or property owned by it makes such qualification necessary; the
states in which the Borrower and each Subsidiary are  incorporated and qualified
to do business are set forth in Schedule  4.01;  the  addresses of all places of
business of the Borrower and its Subsidiaries are as set forth in Schedule 4.01;
neither the Borrower nor any Subsidiary has changed its name, been the surviving
corporation  in a merger,  acquired  any  business,  or  changed  its  principal
executive  office  within  five (5) years  and one (1)  month  prior to the date
hereof,  except as disclosed on Schedule 4.01; the Borrower has no  Subsidiaries
other than the

                                       19
<PAGE>


Subsidiaries  named in  Schedule  4.01;  and all of the  authorized,  issued and
outstanding shares of capital stock of each Subsidiary is owned by the Borrower.

              4.02   DUE  AUTHORIZATION.  Upon execution of the Loan  Documents,
the execution and delivery by the Borrower of this  Agreement and the borrowings
hereunder;  the execution and delivery by the Borrower of the Note, the Security
Instruments,  and the Transfer Order Letters;  and the repayment by the Borrower
of the Indebtedness  evidenced by the Note and interest and fees provided in the
Note and this Agreement are (a) within the corporate power of the Borrower;  (b)
have been duly authorized by all necessary  corporate action, and (c) do not and
will not (i) require the consent of any  regulatory  authority  or  governmental
body,  (ii)  contravene or conflict with any provision of Law or of the articles
or bylaws of the Borrower,  (iii)  contravene  or conflict  with any  indenture,
instrument  or other  agreement to which the Borrower is a party or by which its
property may be presently bound or encumbered,  or (iv) result in or require the
creation or imposition of any mortgage, lien, pledge, security interest,  charge
or other  encumbrance  in,  upon or of any of the  properties  or  assets of the
Borrower under any such  indenture,  instrument or other  agreement,  other than
under any of the Security Instruments.

              4.03   VALID AND BINDING  OBLIGATIONS.  This Agreement,  the Note,
and the Security  Instruments  when duly executed and delivered,  will be legal,
valid and  binding  obligations  of and  enforceable  against the  Borrower,  in
accordance with their  respective  terms (subject to any applicable  bankruptcy,
insolvency or other Laws of general  application  affecting  creditors'  rights,
general equitable principles, whether considered in a proceeding in equity or at
law, and judicial decisions interpreting any of the foregoing).

              4.04   SCOPE AND ACCURACY OF FINANCIAL  STATEMENTS.  All Financial
Statements  submitted and to be submitted to the Bank  hereunder are and will be
complete  and  correct in all  material  respects,  are and will be  prepared in
accordance with GAAP  consistently  applied,  and do and will fairly reflect the
financial  condition  and the results of the  operations  of the Borrower in all
material  respects as of the dates and for the period  stated  therein  (subject
only to normal year-end audit adjustments with respect to such unaudited interim
statements of the Borrower) and no material adverse change has since occurred in
the condition, financial or otherwise, of the Borrower.

              4.05   TITLE  TO  BORROWING  BASE  OIL  AND  GAS  PROPERTIES.  The
Borrower has  Marketable  Title to the working and net revenue  interests in the
Borrowing  Base Oil and Gas  Properties  as set forth on Exhibit  "A",  free and
clear  of  all  mortgages,   liens  and   encumbrances,   except  for  Permitted
Encumbrances and any other exceptions,  limitations or qualifications  expressly
disclosed on Exhibit "A."

              4.06   OIL AND GAS LEASES. The Leases which constitute any part of
the  Borrowing  Base Oil and Gas  Properties  are in full force and effect as to
those  portions  within the Borrowing  Base Oil and Gas  Properties,  are valid,
subsisting  leases as to those  portions  within the Borrowing  Base Oil and Gas
Properties  to which they pertain and all rentals,  royalties  and other amounts
due and payable in accordance  with the terms of the Leases as to those portions
within the Borrowing

                                       20
<PAGE>


Base  Oil and  Gas  Properties,  overriding  royalties,  net  profits  or  other
production  burdens have been duly paid or provided for; the  obligations  to be
performed  under the Leases as to those  portions  within the Borrowing Base Oil
and Gas Properties  have been duly  performed;  and the Borrower is not aware of
any  default by any third  party  under any of the Leases  with  respect to such
third party's obligations.

              4.07   INTEREST  IN THE  BORROWING  BASE  OIL AND GAS  PROPERTIES.
Except as otherwise set forth on Exhibit "A" hereto, with respect to each of the
Borrowing  Base Oil and Gas  Properties  the  ownership  of the Borrower in such
property will, with respect to the wells,  units and/or tracts of land described
in Exhibit "A" hereto in connection with such property, (i) entitle the Borrower
to receive (subject to the terms and provisions of this Agreement) a Net Revenue
Interest  decimal share of the oil and gas produced  from, or allocated to, such
wells,  units  and/or  tracts  equal to not less than the NRI decimal  share set
forth in Exhibit "A" in connection  with such wells,  units and/or  tracts,  and
(ii) cause the Borrower to be obligated to bear a Working Interest decimal share
of the cost of  exploration,  development  and  operation  of such wells,  units
and/or  tracts  of land not  greater  than the W.I.  decimal  share set forth in
Exhibit "A" in  connection  with such wells,  units  and/or  tracts,  unless any
increase in the Borrower's share of costs is accompanied by a pro-rata  increase
in the  Borrower's  share of revenue.  Except as set forth in the instrument and
agreements,  if any, more particularly described in Exhibit "A" hereto, all such
shares of  production  which the Borrower is entitled to receive,  and shares of
expenses  which the Borrower is  obligated  to bear,  are not subject to change,
except for changes  attributable  to future  elections  by the  Borrower  not to
participate  in operations  proposed  pursuant to customary  forms of applicable
joint operating  agreements,  and except for changes  attributable to changes in
participating  areas under any federal units wherein  participating areas may be
formed,  enlarged or contracted in accordance  with the rules and regulations of
the applicable governmental authority.

              4.08   OIL AND GAS CONTRACTS.  The Borrower is not  obligated,  by
virtue  of any  prepayment  under  any  contract  providing  for the sale by the
Borrower of  hydrocarbons  which  contains a  "take-or-pay"  clause or under any
similar prepayment agreement or arrangement, including, without limitation, "gas
balancing  agreements",  to deliver a material amount of  hydrocarbons  produced
from the Borrowing  Base Oil and Gas Properties at some future time without then
or thereafter  receiving full payment therefor (I.E., in the case of oil, not in
excess of sixty (60) days,  and in the case of gas, not in excess of ninety (90)
days).  The  Borrowing  Base  Oil and Gas  Properties  are  not  subject  to any
contractual,  or other  arrangement  for the sale of crude oil  which  cannot be
canceled on ninety (90) days' (or less)  notice,  unless the price  provided for
therein is equal to or greater than the prevailing market price in the vicinity.
The  Borrowing  Base Oil and Gas  Properties  are not  subject  to any gas sales
contract  that  contains  any  material  terms  which are not  customary  in the
industry  within the region in which the Borrowing  Base Oil and Gas  Properties
affected thereby are located.  The Borrowing Base Oil and Gas Properties are not
subject to any regulatory refund obligation and no facts exist which might cause
the same to be imposed.

              4.09   PRODUCING   WELLS.  All  producing  wells  located  on  the
Borrowing Base Oil and Gas Properties have been, during all times that such were
under the direction or control of the

                                       21
<PAGE>


Borrower  and, to the knowledge of the  Borrower,  at all other times,  drilled,
operated and produced in conformity with all applicable Laws, rules, regulations
and orders of all regulatory authorities having jurisdiction,  are subject to no
penalties  on  account  of past  production,  and  are  bottomed  under  and are
producing from, and the well bores are wholly within, the Borrowing Base Oil and
Gas Properties, or on Oil and Gas Properties which have been pooled, unitized or
communitized with the Borrowing Base Oil and Gas Properties.

              4.10   PURCHASERS OF  PRODUCTION.  The persons who are  purchasing
the Borrower's interests in oil and gas produced from the Borrowing Base Oil and
Gas  Properties as of the calendar month during which the initial Loans are made
hereunder are identified on Schedule 4.10 attached hereto.

              4.11   AUTHORIZATIONS  AND CONSENTS.  No  authorization,  consent,
approval,  exemption,  franchise,  permit or  license  of, or filing  with,  any
governmental or public authority or any third party is required to authorize, or
is otherwise required in connection with the valid execution and delivery by the
Borrower of this Agreement, the Note, and the Security Instruments, or any other
instrument  contemplated  hereby,  the  repayment  by the  Borrower  of advances
against the Note and interest and fees provided in the Note and this  Agreement,
or  the  performance  by  the  Borrower  of  its  obligations  under  any of the
foregoing.

              4.12   ENVIRONMENTAL LAWS. The Borrower (a) is and has in the past
been in compliance  with all  Environmental  Laws and all permits,  requests and
notifications  relating to health,  safety or the environment  applicable to the
Borrower or any of its properties,  assets,  operations and businesses;  (b) has
obtained and adhered to and currently  possesses all necessary permits and other
approvals,  including interim status under the Federal Resource Conservation and
Recovery  Act,  necessary to store,  dispose of and otherwise  handle  Hazardous
Substances  and to  operate  its  properties,  assets  and  businesses;  (c) has
reported, to the extent required by all federal, state and local statutes, Laws,
ordinances, regulations, rules, permits, judgments, orders and decrees, all past
and present  sites owned  and/or  operated by the Borrower  where any  Hazardous
Substance  has been  released,  treated,  stored or  disposed of and (d) has not
used,  stored, or Released any Hazardous  Substance in excess of amounts allowed
by  Environmental  Law.  There is (x) no location on any  property  currently or
previously  owned or operated by the Borrower  where  Hazardous  Substances  are
known to have  entered or are likely to enter  into the soil or  groundwater  or
such  property,  other than  immaterial  releases  of oil or natural  gas in the
ordinary course of business none of which releases (i) either  individually,  or
in the aggregate,  has had or may be expected to have material adverse effect on
the  Borrower's  business or (ii) has violated or may be expected to violate any
Environmental  Laws,  and (y) no  on-site  or  off-site  location  to which  the
Borrower has released or  transported  Hazardous  Substances or arranged for the
transportation or disposal of Hazardous Substances,  which is or is likely to be
the subject of any federal,  state,  local or foreign  enforcement action or any
investigation  which could lead to any material  claims  against any such entity
for any clean-up cost, remedial work, damage to natural resources, common law or
legal  liability,  including,  but not limited to,  claims  under  Comprehensive
Environmental  Response,  Compensation,  and Liability  Act. For the purposes of
this Section, references to "the Borrower" shall include all

                                       22
<PAGE>


predecessors,  successors-in-interest  of  the  Borrower;  PROVIDED,  that  with
respect to the Borrower's properties or assets, the foregoing representations as
to predecessors and  successors-in-interest  are limited to the knowledge of the
Borrower.

              4.13   COMPLIANCE WITH LAWS, RULES, REGULATIONS AND ORDERS. Except
to the extent that the failure to comply would not materially interfere with the
conduct of the business of the Borrower or any Subsidiary,  the Borrower and its
Subsidiaries  have each complied with all  applicable  Laws with respect to: (1)
the conduct of its business; and (2) the use, maintenance,  and operation of the
Borrowing Base Oil and Gas Properties and personal properties owned or leased by
it in the conduct of its business;  except as expressly set forth on Exhibit "A"
hereto,  the  Borrower and its  Subsidiaries  possess all  licenses,  approvals,
registrations,  permits and other authorizations necessary to enable it to carry
on its  business  in all  material  respects  as now  conducted,  and  all  such
licenses, approvals, registrations, permits and other authorizations are in full
force and effect; and the Borrower has no reason to believe that the Borrower or
any of its  Subsidiaries  will be  unable  to  obtain  the  renewal  of any such
licenses, approvals, registrations, permits and other authorizations.

              4.14   LIABILITIES,   LITIGATION  AND   RESTRICTIONS.   Except  as
disclosed in the Financial Statements,  the Borrower and its Subsidiaries do not
have any liabilities,  direct or contingent,  which may materially and adversely
affect it, its business or assets. Except as disclosed on Schedule 4.14 attached
hereto,  there is no litigation or other action of any nature pending before any
court, governmental  instrumentality,  regulatory authority or arbitral body or,
to the actual  knowledge of the  Borrower  threatened  against or affecting  the
Borrower or its Subsidiaries which might reasonably be expected to result in any
material, adverse change in the Borrower or its Subsidiaries, or the business or
assets of either. To the best of the Borrower's knowledge,  no unduly burdensome
restriction, restraint or hazard exists by contract or Law that would materially
and  adversely  affect the  Borrower or the pursuit of the  business  activities
conducted by the Borrower.

              4.15   EXISTING  INDEBTEDNESS.  All existing  Indebtedness  of the
Borrower  and any  Subsidiary  is  described  in  Schedule  4.15 and neither the
Borrower  nor any  Subsidiary  is in default with respect to any of its existing
Indebtedness.

              4.16   MATERIAL COMMITMENTS.  Except as described in Schedule 4.16
hereto,  (a) neither the Borrower  nor any  Subsidiary  has any material  leases
(other  than  oil  and  gas  leases),  contracts  or  commitments  of  any  kind
(including,  without limitation,  employment  agreements;  collective bargaining
agreements;  powers  of  attorney;  distribution  arrangements;  patent  license
agreements;  contracts for future  purchase or delivery of goods or rendering of
services;  bonuses,  pension and  retirement  plans;  or accrued  vacation  pay,
insurance and welfare agreements);  (b) to the best of the Borrower's knowledge,
all parties to all such material  leases,  contracts,  and other  commitments to
which  the  Borrower  or any  Subsidiary  is a  party  have  complied  with  the
provisions of such leases, contracts, and other commitments; and (c) to the best
of the  Borrower's  knowledge,  no party is in default  under any thereof and no
event has occurred  that but for the giving of notice or the passage of time, or
both, would constitute a default;

                                       23
<PAGE>


              4.17   MARGIN STOCK. The Borrower is not engaged  principally,  or
as one of its important activities,  in the business of extending credit for the
purpose  of  purchasing  or  carrying   margin  stock  (within  the  meaning  of
Regulations T, U, or X of the Board of Governors of the Federal Reserve System),
and no part of the proceeds of any extension of credit under this Agreement will
be used to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying margin stock. Neither the Borrower nor
any  Person  acting on its behalf  has taken any  action  that  might  cause the
transactions  contemplated by this Agreement or the Note to violate  Regulations
T, U, or X or to violate the Securities Exchange Act of 1934, as amended.

              4.18   PROPER  FILING OF TAX  RETURNS  AND  PAYMENT  OF TAXES DUE.
Except as otherwise permitted herein, the Borrower has filed all federal, state,
and local tax returns and other reports  required by any applicable Laws to have
been filed  prior to the date  hereof,  has paid or caused to be paid all taxes,
assessments,  and other  governmental  charges that are due and payable prior to
the date hereof,  and has made adequate provision for the payment of such taxes,
assessments,  or other charges accruing but not yet payable; the Borrower has no
knowledge of any material deficiency or additional assessment in connection with
any taxes, assessments, or charges not provided for on its books.

              4.19   ERISA.  The  Borrower  is in  compliance  in  all  material
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited  Transaction  has occurred  and is  continuing  with respect to any
plan;  no notice of intent to terminate a plan has been filed,  nor has any plan
been terminated;  no circumstances  exist which constitute grounds under Section
4042 of ERISA  entitling  the PBGC to institute  proceedings  to  terminate,  or
appoint a trustee to  administrate a plan, nor has the PBGC  instituted any such
proceedings;  neither the Borrower nor any ERISA  Affiliate  has  completely  or
partially  withdrawn under Sections 4201 or 4204 of ERISA from a  Multi-Employer
Plan;  the  Borrower  and  each  ERISA  Affiliate  has met its  minimum  funding
requirements  under ERISA with respect to all of its plans and the present value
of all vested benefits under each plan exceeds the fair market value of all plan
assets  allocable to such benefits,  as determined on the most recent  valuation
date of the  plan  and in  accordance  with  the  provisions  of  ERISA  and the
regulations  thereunder for calculating the potential  liability of the Borrower
or any ERISA  Affiliate  to the PBGC or the plan  under  Title IV of ERISA;  and
neither the Borrower nor any ERISA  Affiliate  has incurred any liability to the
PBGC under ERISA.

              4.20   INVESTMENT COMPANY ACT COMPLIANCE. Neither the Borrower nor
any Subsidiary is directly or indirectly  controlled by, or acting on behalf of,
any,  Person  which  is an  "Investment  Company,"  within  the  meaning  of the
Investment Company Act of 1940, as amended.

              4.21   PUBLIC UTILITY HOLDING COMPANY ACT COMPLIANCE. The Borrower
is not a "holding  company",  or an "affiliate"  of a "holding  company" or of a
"subsidiary  company" of a "holding  company",  within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

                                       24
<PAGE>


              4.22   INSURANCE. The Borrower maintains insurance with respect to
the  properties  and  business  of the  Borrower  providing  coverage  for  such
liabilities,  casualties,  risks and  contingencies  and in such  amounts  as is
customary in the industry.  The insurance  coverage reflected on the Certificate
of Insurance  attached hereto as Schedule 4.22 is in full force and effect,  and
all premiums due thereon have been paid.

              4.23   MATERIAL MISSTATEMENTS AND OMISSIONS.  No representation or
warranty by or with respect to the Borrower or any Subsidiary  contained  herein
or in any  certificate  or  other  document  furnished  by the  Borrower  or any
Subsidiary  pursuant hereto contains any untrue  statement of a material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.

              4.24   PIPELINE ASSETS.  The Borrower owns Marketable Title to the
pipeline assets and facilities as shown on Schedule 4.24.

              4.25   OWNERSHIP INTERESTS. Each officer and each director of each
Borrower is identified on Schedule  4.25,  along with the stock owned by each in
Tengasco,  Inc. In addition,  Tennessee Land & Mineral  Corporation and Tengasco
Pipeline Corporation are each wholly owned Subsidiaries of Tengasco, Inc.

                                   ARTICLE V.

                              AFFIRMATIVE COVENANTS
                              ---------------------

              Borrower  covenants so long as any Indebtedness of the Borrower to
the Bank remains unpaid under this Agreement, or any Obligations of the Borrower
to the Bank remain  unsatisfied,  or the Bank remains obligated to make advances
hereunder, to:

              5.01   USE OF FUNDS. Use the proceeds  advanced under the Loan to:
(a) refinance Borrower's existing  indebtedness listed on Schedule 4.15, and (b)
fund (i)  acquisitions  of Oil and Gas  Properties,  (ii)  development  drilling
programs, (iii) working capital, (iv) general operations,  and (v) other general
corporate purposes.

              5.02   MAINTENANCE AND ACCESS TO RECORDS. Keep adequate records in
accordance with good  accounting  practices,  of all of the  transactions of the
Borrower so that at any time, and from time to time, such records present fairly
the financial  condition of the Borrower which may be readily determined and, at
the Bank's reasonable  request,  make all financial records and records relating
to the Borrowing Base Oil and Gas Properties available for the Bank's inspection
and permit the Bank to make and take away copies thereof.

              5.03   QUARTERLY  UNAUDITED FINANCIAL  STATEMENTS.  Deliver to the
Bank,  on or before the  forty-fifth  (45th) day after the end of each  calendar
quarter,  unaudited Financial Statements of the Borrower,  as at the end of such
period and from the beginning of such fiscal year to the end of

                                       25
<PAGE>


the  respective  period,  as applicable,  which  Financial  Statements  shall be
certified by the president or chief financial officer of the Borrower,  as being
true and correct, subject to changes resulting from year-end audit adjustments.

              5.04   ANNUAL AUDITED FINANCIAL  STATEMENTS.  Deliver to the Bank,
on or before the ninetieth (90th) day after the close of each fiscal year of the
Borrower a copy of annual audited Financial Statements of the Borrower, together
with the  report  and  opinion  thereon  of BDO  Seidman  or such  other firm of
independent  certified  public  accountants   acceptable  to  the  Bank  at  its
reasonable discretion.

              5.05   COMPLIANCE CERTIFICATE.  At the time of Closing, and at the
time of delivery of the certified but unaudited Financial Statements pursuant to
Section 5.03 above, and the delivery of the annual audited Financial  Statements
pursuant to Section 5.04 above, deliver to the Bank a Compliance Certificate.

              5.06   STATEMENT OF MATERIAL ADVERSE CHANGE IN CONDITION.  Deliver
to the Bank,  promptly upon any officer of the Borrower having  knowledge of any
material  adverse  change  in the  condition,  financial  or  otherwise,  of the
Borrower (or any event or  circumstance  that would result in any such  material
adverse change in  condition),  a statement of the  President,  Chief  Executive
Officer,  or the Chief  Financial  Officer of the  Borrower,  setting  forth the
change in condition or event or circumstance likely to result in any such change
and the  steps  being  taken by the  Borrower  with  respect  to such  change in
condition or event or circumstance.

              5.07   TITLE DEFECTS. Cure any title defects to the Borrowing Base
Oil and Gas Properties  material in value, in the sole opinion of the Bank, and,
in the event any title defects are not cured in a timely manner, pay all related
costs and fees incurred by the Bank to do so.

              5.08   ADDITIONAL   INFORMATION.   Furnish   to   the   Bank   all
information,  if any,  filed with the SEC by the  Borrower  and all  information
routinely  provided by the Borrower to its shareholders,  generally.  Furnish to
the Bank, promptly upon the Bank's reasonable request, such additional financial
or  other  information  concerning  the  assets,  liabilities,  operations,  and
transactions  of  the  Borrower,  including,  without  limitation,   information
concerning title to any of the Borrowing Base Oil and Gas Properties.

              5.09   COMPLIANCE   WITH  LAWS  AND  PAYMENT  OF  ASSESSMENTS  AND
CHARGES.   Materially  comply  with  all  applicable   statutes  and  government
regulations,   including,   without  limitation,   ERISA,  and  pay  all  taxes,
assessments,  governmental charges,  claims for labor, supplies,  rent and other
obligations  which,  if  unpaid,  might  become a lien  other  than a  Permitted
Encumbrance against its property, except any of the foregoing being contested in
good faith and as to which accruals  satisfactory to the Bank, in its reasonable
discretion, have been provided.

              5.10   MAINTENANCE  OF EXISTENCE AND GOOD  STANDING.  Maintain the
Borrower's  corporate  existence  and good standing in the  jurisdiction  of its
organization, and maintain the

                                       26
<PAGE>


Borrower's  qualification and good standing in all other  jurisdictions  wherein
the  property  now owned or  hereafter  acquired  or business  now or  hereafter
conducted by Borrower  necessitates same, other than those jurisdictions wherein
the  failure  to so  qualify  will not have a  material  adverse  effect  on the
Borrower.

              5.11   FURTHER  ASSURANCES.  Promptly  cure  any  defects  in  the
execution and delivery of this  Agreement,  the Note, the Security  Instruments,
the  Transfer  Order  Letters,  or any other  instrument  referred  to herein or
executed in connection  with the Note,  and upon the  reasonable  request of the
Bank,  promptly  execute  and  deliver  to the Bank all such  other and  further
instruments  as may be  reasonably  required or desired by the Bank from time to
time in compliance with the covenants and agreements made in this Agreement.

              5.12   INITIAL  EXPENSES  OF THE BANK.  Pay prior to or at Closing
all  documented  reasonable  fees and expenses of Porter & Hedges,  L.L.P.,  the
special legal  counsel for the Bank  incurred  directly and solely in connection
with the preparation of this Agreement, the Note, the Security Instruments,  the
Transfer Order Letters,  and any other instrument referred to herein or executed
directly  and  solely in  connection  with the  Note,  the  satisfaction  of the
conditions  precedent  set  forth  in  Article  III of  this  Agreement  and the
consummation of the transactions contemplated in this Agreement.

              5.13   SUBSEQUENT  EXPENSES OF THE BANK.  Upon  request,  promptly
reimburse the Bank for all documented amounts reasonably  expended,  advanced or
incurred  by the Bank to collect  the Note or to enforce  the rights of the Bank
under this  Agreement,  the Note, the Security  Instruments,  the Transfer Order
Letters,  or any other  instrument  referred to herein or executed in connection
with the  Note,  which  amounts  shall be  deemed  compensatory  in  nature  and
liquidated  as to  amount  upon  notice  to the  Borrower  by the Bank and which
amounts will include, but not be limited to, (a) all court costs, (b) reasonable
attorneys'  fees,  (c)  fees of  auditors  and  accountants,  (d)  investigation
expenses,  (e) internal fees of the Bank's in-house legal counsel,  (f) fees and
expenses incurred in connection with the Bank's participation as a member of the
creditors committee in a case commenced under Title 11 of the United States Code
or other  similar  Law of the  United  States,  the  State of Texas or any other
jurisdiction,  (g) fees and  expenses  incurred in  connection  with lifting the
automatic stay  prescribed in ss.ss.362  Title 11 of the United States Code, and
(h) fees and  expenses  incurred  in  connection  with any  action  pursuant  to
ss.ss.1129 Title 11 of the United States Code,  reasonably  incurred by the Bank
in connection with the collection of any sums due under this Agreement, together
with interest at the Floating Rate per annum, calculated on a basis of a year of
three hundred sixty (360) days on each such amount from the date of notification
to the  Borrower  that the same was  expended,  advanced or incurred by the Bank
until,  but  not  including,  the  date  it is  repaid  to the  Bank,  with  the
obligations  under this  Section  5.13,  surviving  the  non-assumption  of this
Agreement in a case commenced  under Title 11 of the United States Code or other
similar Law of the United States,  the State of Texas or any other  jurisdiction
and being binding upon the Borrower or a trustee,  receiver or liquidator of any
such party appointed in any such case.

                                       27
<PAGE>


              5.14   MAINTENANCE  OF  TANGIBLE  PROPERTY.  Maintain  all  of its
tangible  property relating to the Borrowing Base Oil and Gas Properties in good
repair and  condition and make all  necessary  replacements  thereof and operate
such  property in a good and  workmanlike  manner in  accordance  with  standard
industry  practices,  unless  the  failure  to do so would  not have a  material
adverse  effect on the Borrower or the value of any  Borrowing  Base Oil and Gas
Property.

              5.15   MAINTENANCE OF INSURANCE. Continue to maintain, or cause to
be  maintained,  insurance  with respect to the  properties  and business of the
Borrower against such  liabilities,  casualties,  risks and contingencies and in
such amounts as is  customary  in the industry and furnish to the Bank  annually
after the execution of this Agreement certificates evidencing such insurance.

              5.16   INSPECTION OF TANGIBLE  ASSETS/RIGHT  OF AUDIT.  Permit any
authorized  representative  of the Bank to visit and inspect (at the risk of the
Bank and/or such  representative) any tangible asset of the Borrower,  and/or to
audit the books and records of the Borrower during normal business hours, at the
expense  of the Bank and  during  normal  business  hours  following  reasonable
advance notice.

              5.17   PAYMENT OF NOTE AND  PERFORMANCE  OF  OBLIGATIONS.  Pay the
Note according to the reading, tenor and effect thereof, as modified hereby, and
do and perform  every act and discharge  all of the  Obligations  provided to be
performed and discharged hereunder.

              5.18   BORROWING  BASE.  Maintain a  Borrowing  Base such that the
amount of the  Borrower's  outstanding  Revolving  Loan  will not,  at any time,
exceed its Borrowing Base.

              5.19   COMPLIANCE WITH ENVIRONMENTAL  LAWS. Comply in all material
respects with any and all requirements of Law,  including,  without  limitation,
Environmental  Laws, (a) applicable to any natural or environmental  resource or
media located on, above,  within,  in the vicinity of, related to or affected by
any Borrowing Base Oil and Gas Properties or any other property of the Borrower,
or (b) applicable to the  performance  or conduct of is  operations,  including,
without  limitation,  all  permits,  licenses,   registrations,   approvals  and
authorizations,  and, in this regard,  comply fully and in a timely manner with,
and cause all employees,  crew members,  agents,  contractors and subcontractors
(pursuant to appropriate contractual provisions) and future lessees (pursuant to
appropriate  lease  provisions)  of the  Borrower  while such Persons are acting
within the scope of their relationship with the Borrower, to so comply with, all
applicable  requirements  of  Law,  including,  without  limitation,  applicable
Environmental  Laws,  and other  applicable  requirements  with  respect  to the
property of the Borrower, as applicable,  and the operation thereof necessary or
appropriate to enable the Borrower,  as applicable,  to fulfill its  obligations
under  all  applicable  requirements  of  Law,  including,  without  limitation,
Environmental  Laws,  applicable  to the  use,  generation,  handling,  storage,
treatment,  transport and disposal of any Hazardous  Substances now or hereafter
located or present on or under any such property.

              5.20   HAZARDOUS  SUBSTANCES  INDEMNIFICATION.  Indemnify and hold
the  Bank  harmless  from  and  against  any and all  claims,  losses,  damages,
liabilities, fines, penalties, charges,

                                       28
<PAGE>


administrative and judicial proceedings and orders, judgments, remedial actions,
requirements  and  enforcement  actions of any kind,  and all costs and expenses
incurred in connection therewith (including, without limitation, attorneys' fees
and expenses),  arising directly or indirectly,  in whole or in part, out of (a)
the presence of any Hazardous Substances on, under or from its property, whether
prior to or during the term hereof, or (b) any activity carried on or undertaken
on or off its property,  whether prior to or during the term hereof, and whether
by  the  Borrower,  or any  predecessor  in  title  or  any  employees,  agents,
contractors or subcontractors  of the Borrower,  or any predecessor in title, or
any  third  Persons  at any time  occupying  or  present  on such  property,  in
connection  with the handling,  treatment,  removal,  storage,  decontamination,
cleanup,  transportation  or disposal of any  Hazardous  Substances  at any time
located  or  present on or under such  property;  with the  foregoing  indemnity
further  applying to any residual  contamination on or under the property of the
Borrower,  or any  property  of any  other  Person,  or  affecting  any  natural
resources, and to any contamination of any property or natural resources arising
in connection with the generation,  use,  handling,  storage,  transportation or
disposal  of any  Hazardous  Substances,  irrespective  of  whether  any of such
activities were or will be undertaken in accordance with applicable requirements
of  Law,  including,  without  limitation,  Environmental  Laws,  and  surviving
satisfaction of all Indebtedness of the Borrower to the Bank and the termination
of this Agreement,  unless all such  Indebtedness  has been satisfied  wholly in
cash from the Borrower and not by way of realization against any property or the
conveyance  of any property of the Borrower in lieu  thereof,  PROVIDED that the
claims and other  actions of any kind  against  the Bank which give rise to such
indemnity are not barred by the  applicable  statute of  limitations at the time
such claims or actions are instituted and such indemnity shall not extend to any
act or omission by the Bank with respect to the relevant property  subsequent to
the Bank  becoming the owner of,  taking  possession  of to the exclusion of the
Borrower or assuming operations of any property previously owned by the Borrower
and with respect to which property such claim,  loss, damage,  liability,  fine,
penalty,  charge,  proceeding,  order,  judgment,  action or requirement  arises
subsequent to the  acquisition of title thereto,  taking  possession  thereof or
assumption of operations thereon by the Bank.

              5.21   PROPERTIES NOT OPERATED BY THE BORROWER. With regard to all
of the  Borrower's  covenants  in  this  Article  V that  relate  to Oil and Gas
Properties,  if any, for which Borrower is not the operator,  to the extent that
the  performance of such covenants can only be carried out through the operator,
the  Borrower  shall  exercise  reasonable  diligence  under  the  terms  of the
applicable   operating  agreements  to  cause  the  operators  to  satisfy  such
covenants, but shall not be directly responsible for doing so.

              5.22   TRANSACTIONS WITH AFFILIATES. Conduct all transactions with
any  Affiliate  of the Borrower on an  arm's-length  basis  (provided  that such
transactions are otherwise permitted by the terms of this Agreement).

              5.23   LEASES.   Keep  and  continue  all  Leases  comprising  the
Borrowing  Base Oil and Gas  Properties  and related  contracts  and  agreements
relating  thereto in full force and effect in accordance  with the terms thereof
and not permit the same to lapse or  otherwise  become  impaired  for failure to
comply with the  obligations  thereof,  whether  express or  implied;  PROVIDED,
HOWEVER,

                                       29
<PAGE>


that this provision shall not prevent the Borrower from abandoning and releasing
any  such  Leases  upon  their  termination  as the  result  of the  failure  of
production in paying quantities that did not result from the Borrower's  failure
to maintain such production as a reasonably prudent operator.

              5.24   OPERATION OF BORROWING BASE OIL AND GAS PROPERTIES. Operate
or, to the extent that the right of operation is vested in others,  exercise all
reasonable efforts to require the operator to operate the Borrowing Base Oil and
Gas Properties  and all wells drilled  thereon and that may hereafter be drilled
thereon,  continuously  and  in a  good  and  workmanlike  manner  as a  prudent
operator,  and in  accordance  with all Laws of the State in which the Borrowing
Base Oil and Gas  Properties  are situated and the United States of America,  as
well as all  rules,  regulations,  and Laws of any  governmental  agency  having
jurisdiction to regulate the manner in which the operation of the Borrowing Base
Oil and Gas  Properties  shall be  carried  on,  and  comply  with all terms and
conditions of the Leases it now holds, and any assignment or contract obligating
the  Borrower  in any  way  with  respect  to the  Borrowing  Base  Oil  and Gas
Properties;  but nothing  herein  shall be  construed to empower the Borrower to
bind  the  Bank  to any  contract  obligation,  or  render  the  Bank in any way
responsible or liable for bills or obligations incurred by the Borrower.

              5.25   ASSIGNMENTS.  Upon request of the Bank, execute and deliver
written  notices of assignments to any persons,  corporations  or other entities
owing or which may in the future owe to the Borrower monies or accounts  arising
in  connection  with any of the following  matters:  (a) any oil, gas or mineral
production  from  the  Borrowing  Base  Oil  and  Gas  Properties;  (b)  any gas
contracts,  processing  contracts or other  contracts  relating to the Borrowing
Base Oil and Gas Properties; or (c) the operation of or production from any part
of the Borrowing Base Oil and Gas Properties.

              5.26   CHANGE OF PURCHASERS OF PRODUCTION. Along with the delivery
of each Compliance  Certificate  pursuant to Section 5.05, and at any other time
that the Bank may so request in writing,  the Borrower  shall notify the Bank in
writing  of the  identity  and  address  of  each  then-  current  purchaser  of
production  from the Borrowing Base Oil and Gas Properties  and, if requested by
the Bank,  shall  provide the Bank with Transfer  Order Letters  executed by the
Borrower and addressed to such purchasers of production.

              5.27   PAYMENT OF TAXES,  ETC. The  Borrower and its  Subsidiaries
will each pay or cause to be paid when due, all taxes, assessments,  and charges
or levies  imposed  upon it or on any of its property or which it is required to
withhold  and  pay,   except  where  contested  in  good  faith  by  appropriate
proceedings with adequate  reserves therefor having been set aside on its books,
provided,  however,  that the  Borrower and its  Subsidiaries  shall each pay or
cause to be paid all such  taxes,  assessments,  charges,  or  levies  forthwith
whenever  foreclosure on any lien that may have attached (or security  therefor)
appears imminent.

              5.28   NOTICE OF  LITIGATION.  The Borrower  and its  Subsidiaries
will each give immediate notice to the Bank of: (1) any litigation or proceeding
in which it is a party if an adverse  decision  therein  would require it to pay
more than $50,000.00 or deliver assets the value of which

                                       30
<PAGE>


exceeds  such sum  (whether  or not the claim is  considered  to be  covered  by
insurance);  and (2) the  institution of any other suit or proceeding  involving
the  Borrower  that  might  materially  and  adversely  affect  its  operations,
financial condition, property, or business prospects.

              5.29   NOTICE  OF  EVENTS  OF  DEFAULT.   The   Borrower  and  its
Subsidiaries  will each notify the Bank  immediately  if it becomes aware of the
occurrence of any Event of Default or of any fact, condition, or event that only
with the giving of notice or passage of time or both,  would  become an Event of
Default or if it becomes  aware of any material  adverse  change in the business
prospects,  financial condition (including,  without limitation,  proceedings in
bankruptcy,  insolvency,  reorganization,  or the  appointment  of a receiver or
trustee), or results of operations of the Borrower or any Subsidiary,  or of the
failure of the  Borrower to observe any of its  undertakings  hereunder or under
the Security Instruments.

              5.30   NOTICE OF CHANGE OF PRINCIPAL OFFICES. The Borrower and its
Subsidiaries will each notify the Bank thirty (30) days in advance of any change
in the location of their principal offices.

              5.31   EMPLOYEE BENEFIT PLANS. Fund its Plan(s) in accordance with
no less than the minimum funding  standards of 29 U.S.C.A.  ss.ss. 1082 (Section
302 of ERISA);  furnish the Bank,  promptly after the filing or receiving of the
same, with copies of any reports or other  statements  filed with, or notices or
other  communications  received from, the United States Department of Labor, the
PBGC, or the Internal  Revenue  Service with respect to any such Plan;  promptly
advise  the  Bank  of the  occurrence  of any  Reportable  Event  or  Prohibited
Transaction  with respect to any such Plan and the action the Borrower  proposes
to take with respect  thereto;  and  promptly  advise the Bank when the Borrower
knows or has reason to believe that the PBGC or the Borrower has  instituted  or
will  institute  proceedings  under Title IV of ERISA to terminate any such Plan
and the action the Borrower proposes to take with respect thereto.

              5.32   PRODUCTION  REPORTS.  On or before the thirtieth (30th) day
after the end of each month prior to the Revolving  Loan  Termination  Date, the
Borrower shall prepare and submit to the Bank a report of Borrower's oil and gas
production during such month, on a field-by-field basis,  including all material
details  regarding the sale or other  disposition of such production,  in a form
reasonably acceptable to the Bank.

              5.33   OPERATING ACCOUNTS. Maintain its primary operating accounts
with the Bank.

              5.34   PAYMENT OF OBLIGATIONS.  Promptly pay (or renew and extend)
all  of its  Indebtedness,  as it  becomes  due  (unless  such  Indebtedness  is
contested in good faith by appropriate proceedings).

              5.35   AGREEMENTS.  On or before December 27, 2001, Borrower shall
enter into Permitted Hedge Agreements that are satisfactory to Bank, in its sole
discretion, which Permitted Hedge Agreements, shall (i) include minimum terms of
six (6) months beginning no later than

                                       31
<PAGE>


January 1, 2002,  (ii) contain  minimum  strike prices  acceptable to Bank,  and
(iii) cover a minimum of 150 barrels per day of oil production and 3,500 MCF per
day of gas production attributable to the Borrowing Base Oil and Gas Properties.
In addition,  on or before June 30, 2002,  Borrower  shall enter into  Permitted
Hedge Agreements that are  satisfactory to Bank, in its sole  discretion,  which
Permitted  Hedge  Agreements,  shall (i) include minimum terms of six (6) months
beginning  no later  than July 1,  2002,  (ii)  contain  minimum  strike  prices
acceptable  to  Bank,  and  (iii)  cover a  minimum  of fifty  percent  (50%) of
Borrowers then current oil production and fifty percent (50%) of Borrower's then
current  gas  production   attributable  to  the  Borrowing  Base  Oil  and  Gas
Properties.  For purposes of this Section 5.35,  fixed price  contracts  entered
into between Borrower and any third-party purchaser of either Borrower's current
oil  production  or  Borrower's  current  gas  production  attributable  to  the
Borrowing  Base Oil and Gas  Properties  are  acceptable  in complying  with the
requirements under this Section 5.35.

                                   ARTICLE VI.

                               NEGATIVE COVENANTS
                               ------------------

              Without the prior  written  consent of the Bank and so long as any
part of the  principal or interest on the Note shall  remain  unpaid or the Bank
remains obligated to make advances  hereunder,  Borrower  covenants that it will
not:

              6.01   OTHER  INDEBTEDNESS.  Incur,  create,  assume  or suffer to
exist  any  Indebtedness,  whether  by way of  loan or the  issuance  or sale of
securities,  except  unsecured debt incurred in the ordinary course of business,
not exceeding at any one time outstanding, the sum of $100,000.00.

              6.02   LOANS OR ADVANCES. Make or agree to make or allow to remain
outstanding  any loans or advances  to any Person,  except for loans or advances
that  do not  exceed  $10,000.00  in  the  aggregate,  and  except  advances  or
extensions of credit in the form of accounts receivable incurred in the ordinary
course of business.

              6.03   MORTGAGES  OR  PLEDGES  OF  ASSETS.  Except  for  Permitted
Encumbrances,  create,  incur, assume or permit to exist, any mortgage,  pledge,
security  interest,  lien or encumbrance on any of its properties or assets (now
owned or hereafter  acquired)  including,  without  limitation,  those  pipeline
assets and facilities as shown on Schedule 4.24.

              6.04   SALES OF ASSETS.  Except for Permitted  Asset Sales,  sell,
lease, assign, transfer or otherwise dispose of, in one or any series of related
transactions,  all or any portion of its Oil and Gas  Properties,  the  pipeline
assets and  facilities  described  on Schedule  6.03 or other  material  assets,
whether now owned or hereafter  acquired,  including  transfers to Subsidiaries,
nor enter into any arrangement,  directly or indirectly, with any Person to sell
and rent or lease back as lessee  such  property  or any part  thereof  which is
intended  to be used for  substantially  the same  purpose  or  purposes  as the
property sold or transferred.

                                       32
<PAGE>


              6.05   DIVIDENDS. Declare or pay any distribution on, or purchase,
redeem or otherwise  acquire for value,  any  interest in the Borrower  provided
that Borrower may make preferred  dividend  payments to the extent that no Event
of Default or  Unmatured  Event of Default  has  occurred  is  continuing  or if
payment would result in the occurrence of an Event of Default or Unmatured Event
of Default.

              6.06   PAYMENT OF ACCOUNTS  PAYABLE.  Allow any account payable to
remain  unpaid more than sixty (60) days after due date,  except such as are (i)
being contested in good faith and as to which adequate  provision or accrual has
been made, or (ii) the subject of usual and customary review and evaluation.

              6.07   CANCELLATION  OF  INSURANCE.  Allow  any  insurance  policy
required to be carried  hereunder to be  terminated  or lapse or expire  without
provision for adequate renewal thereof.

              6.08   INVESTMENTS.  Make  Investments in or purchase or otherwise
acquire all or substantially  all of the assets of any Person,  or any shares of
stock of, or similar interest in, any other Person, if the result of such action
would  impair the  ability of the  Borrower  to perform  any of its  Obligations
pursuant to this Agreement,  including,  without  limitation,  the obligation to
repay the  Indebtedness  evidenced  by the Note,  except that the  Borrower  may
invest in instruments that are investment grade.

              6.09   CHANGES IN STRUCTURE OR BUSINESS. Consolidate or merge with
or purchase (for cash or securities) all or a substantial  part of the assets or
capital stock of any corporation,  firm, association or enterprise, or allow any
such  entity to be  merged  into the  Borrower,  or  change  the basic  business
operations of the Borrower.

              6.10   LIMITATION ON LEASES.  Incur or otherwise  become obligated
to make  payments on operating  and capital  leases not incurred in the ordinary
course of business.

              6.11   POOLING OR UNITIZATION.  Voluntarily pool or unitize all or
any  part of the  Borrowing  Base  Oil and Gas  Properties  if such  pooling  or
unitization  would  not be done by a  prudent  operator  or would  result in the
diminution of the Borrower's net revenue  interest in production from the pooled
or unitized  lands that is greater than the  proportionate  reduction that would
result from  allocating the pooled or unitized  production from the pool or unit
to each tract included  therein on a surface  acreage basis,  without the Bank's
prior consent, which will not be unreasonably withheld. Any unitization, pooling
or  communitization  or other action or  instrument in violation of this Section
6.11 shall be of no force or effect against the Bank.

              6.12   HEDGE  AGREEMENTS.  Except for Permitted Hedge  Agreements,
enter into or become  obligated  under any contract for sale for future delivery
of  Hydrocarbons  other than normal  production  contracts  entered  into in the
Borrower's  normal course of business  (whether or not the subject  Hydrocarbons
are to be delivered), forward contract, Hedging Agreement, futures contract

                                       33
<PAGE>


or any other similar  agreement,  without the prior written consent of the Bank,
acting in its sole discretion.

              6.13   CAPITAL  STOCK OF  BORROWER.  Neither the  Borrower nor any
Subsidiary  will either:  (1) redeem,  purchase,  or retire its capital stock or
purchase or retire any warrant,  right,  or option  pertaining  thereto or other
security convertible into any of the foregoing,  for an aggregate  consideration
exceeding $150,000 paid while this Agreement is in effect; or (2) except for (i)
the issuance of the  Borrower's  capital stock which does not result in a Change
of Control; and (ii) except in accordance with that certain Loan Agreement dated
November 8, 1998 between Tengasco, Inc. and United Missouri Bank of St. Louis as
Trustee; grant or issue, or permit any transfer,  sale, redemption,  retirement,
or other  change in the  ownership  of,  the  outstanding  capital  stock of the
Borrower  or any  Subsidiary,  without  the prior  written  consent of the Bank,
acting in its sole discretion.

              6.14   MARGIN STOCK.  Neither the Borrower nor any Subsidiary will
directly  or  indirectly  apply  any part of the  proceeds  of the  Loans to the
purchasing or carrying of any "margin  stock" within the meaning of Regulation U
of the Board of Governors of the Federal  Reserve  System,  or any  regulations,
interpretations or rulings thereunder.

              6.15   GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Pay,  incur,  or
otherwise  become  obligated to pay General and  Administrative  Expenses  which
exceed  $750,000  during any fiscal  quarter  beginning  with the fiscal quarter
ending March 31, 2002.

              6.16   MINIMUM TANGIBLE NET WORTH.  Permit  Consolidated  Tangible
Net Worth to be less than $18,000,000.00, PLUS fifty percent (50%) of Borrower's
positive quarterly net income, if any,  calculated in accordance with GAAP as of
the end of each fiscal quarter of Borrower,  without offset or reduction for net
losses incurred  during any quarter,  beginning with the quarter ending December
31, 2001, and one hundred percent (100%) of any increase in shareholder's equity
resulting  from the issuance of stock in Borrower  (including  any conversion of
Debt to equity) subsequent to the Closing.

              6.17   CURRENT  RATIO.  Permit as of the end of any fiscal quarter
its Current Ratio to be less than 1.00 to 1.00, with the initial  calculation of
such ratio to be made as of December 31, 2001.

              6.18   DEBT SERVICE  COVERAGE  RATIO.  Permit as of the end of any
fiscal quarter its Debt Service Coverage Ratio to be less than 1.25 to 1.0, with
the initial  calculation  of such ratio to be made for the quarter  ending March
31, 2002.

              6.19   CHANGE  OF   CONTROL.   Permit  any  event  to  occur  that
constitutes or results in a Change of Control.

                                       34
<PAGE>


                                  ARTICLE VII.

                                EVENTS OF DEFAULT
                                -----------------

              7.01   ENUMERATION  OF EVENTS  OF  DEFAULT.  Any of the  following
events shall be considered an Event of Default as that term is used herein:

              (a)    Default shall be made by the Borrower in the payment within
       two (2) days after such payment was due of any  installment  of principal
       or interest  (including,  without  limitation,  any mandatory  prepayment
       payable  pursuant to Section 2.06 of this  Agreement)  on the Note or any
       other monetary obligation payable hereunder when due, including,  without
       limitation, any fee due to the Bank hereunder;

              (b)    Default shall be made by the Borrower in the due observance
       or performance of any  affirmative  covenant  required in this Agreement,
       the Note or the Security  Instruments and such default continues for more
       than thirty (30) days after the earlier of: (i) Borrower having knowledge
       thereof, or (ii) Borrower receiving written notice thereof from the Bank;

              (c)    Default shall be made by the Borrower in the due observance
       or performance of any negative covenant  required in this Agreement,  the
       Note or the Security Instruments;

              (d)    Any  representation or warranty herein made by the Borrower
       proves  to  have   been   untrue  in  any   material   respect,   or  any
       representation,  statement (including Financial Statements),  certificate
       or data  furnished  or made by the  Borrower  to the  Bank in  connection
       herewith  proves  to have  been  untrue in any  respect  material  to the
       Borrower  as of the date the  facts  therein  set  forth  were  stated or
       certified;

              (e)    Default  shall be made by the  Borrower  (as  principal  or
       other surety) in payment or performance of any bond,  debenture,  note or
       other evidence of  Indebtedness  for borrowed  money, or under any credit
       agreement,  loan  agreement,   indenture,   promissory  note  or  similar
       agreement or instrument executed in connection with any of the foregoing;
       and such default shall remain  unremedied  for in excess of the period of
       grace, if any, with respect thereto,  with the effect of accelerating the
       maturity of any such material Indebtedness;

              (f)    The Borrower discontinues its usual business or applies for
       or consents to the appointment of a receiver, trustee or liquidator of it
       or all or a  substantial  part of its  assets,  or (ii) files a voluntary
       petition  commencing  a case under  Title 11 of the United  States  Code,
       seeking liquidation,  reorganization or rearrangement or taking advantage
       of any  bankruptcy,  insolvency,  debtor's relief or other similar Law of
       the United States the State of Texas or any other jurisdiction,  or (iii)
       makes a general  assignment  for the  benefit  of  creditors,  or (iv) is
       unable,  or admits in writing its inability to pay its debts generally as
       they  become  due,  or  (v)  files  an  answer   admitting  the  material
       allegations of a petition  filed against it in any case  commenced  under
       Title 11 of the United States Code or any

                                       35
<PAGE>


       reorganization,  insolvency,  conservatorship or similar proceeding under
       any bankruptcy,  insolvency,  debtor's relief or other similar Law of the
       United States, the State of Texas or any other jurisdiction;

              (g)    An order,  judgment or decree shall be entered  against the
       Borrower  by any court of  competent  jurisdiction  or by any other  duly
       authorized  authority,  on  the  petition  of a  creditor  or  otherwise,
       granting  relief  under  Title 11 of the United  States Code or under any
       bankruptcy,  insolvency,  debtor's  relief  or other  similar  Law of the
       United States, the State of Texas or any other jurisdiction,  approving a
       petition  seeking  reorganization  or an  arrangement  of  its  debts  or
       appointing a receiver, trustee,  conservator,  custodian or liquidator of
       it or all or any substantial part of its assets,  and the failure to have
       such  order,  judgment  or decree  dismissed  within ten (10) days of its
       entry;

              (h)    the Borrower  has  concealed,  removed,  or permitted to be
       concealed or removed,  any part of its  property,  with intent to hinder,
       delay or defraud its  creditors or any of them; or has made or suffered a
       transfer of any of its  property  which may be  fraudulent  under any the
       Bankruptcy,  fraudulent  conveyance  or  similar  Law;  or has  made  any
       transfer  of its  property  to or for the benefit of a creditor at a time
       when  other  creditors  similarly  situated  have not been  paid;  or has
       suffered or  permitted,  while  insolvent,  any creditor to obtain a lien
       upon any of its property through legal  proceedings or distraint which is
       not vacated within thirty (30) days from the date thereof; or

              (i)    the  Liens  under  the  Security  Instruments  cease  to be
       perfected or cease to be first  priority  Liens subject to only Permitted
       Encumbrances.

              7.02   RIGHTS UPON  UNMATURED  EVENT OF DEFAULT.  At any time that
there exists an Unmatured Event of Default, any obligation of the Bank hereunder
to make advances to or for the benefit of the Borrower shall be suspended unless
and until the Bank shall  reinstate the same in writing,  the Unmatured Event of
Default  shall have been waived by the Bank or the relevant  Unmatured  Event of
Default shall have been remedied prior to ripening into an Event of Default.

              7.03   RIGHTS  UPON  DEFAULT.  Upon the  happening  of an Event of
Default specified in Subsections 7.01 (f) or (g), the entire aggregate principal
amount of all Indebtedness  then outstanding  hereunder and the interest accrued
thereon shall  automatically  become  immediately due and payable,  and upon the
happening  of any  other  Event of  Default,  the Bank may  declare  the  entire
aggregate  principal amount of all Indebtedness  then outstanding  hereunder and
the interest  accrued thereon  immediately due and payable.  In either case, the
entire  principal  and  interest  shall  thereupon  become  immediately  due and
payable,  without notice  (including,  without  limitation,  notice of intent to
accelerate   maturity  or  notice  of  acceleration  of  maturity)  and  without
presentment,  demand,  protest,  notice of protest or other notice of default or
dishonor of any kind, except as provided to the contrary  elsewhere herein,  all
of which are hereby expressly waived by the Borrower.

                                       36
<PAGE>


              Upon the happening of any Event of Default,  all  obligations  (if
any) of the Bank hereunder,  including specifically, but without limitation, any
obligation to make Loans hereunder,  shall at the option of the Bank immediately
cease and terminate.

              7.04   REMEDIES.  After  any  acceleration,  as  provided  for  in
Section 7.03,  the Bank shall have, in addition to the rights and remedies given
them by this  Agreement and the Security  Instruments,  all those allowed by all
applicable Laws, including, but without limitation,  the Uniform Commercial Code
as  enacted  in any  jurisdiction  in  which  any  Borrowing  Base  Oil  and Gas
Properties may be located. Without limiting the generality of the foregoing, the
Bank may  immediately,  without demand of  performance  and without other notice
(except as specifically  required by this Agreement or the Security Instruments)
or demand whatsoever to the Borrower,  all of which are hereby expressly waived,
and without  advertisement,  sell at public or private sale or otherwise realize
upon, in Harris  County,  Texas,  or in any other place where the Borrowing Base
Oil and Gas Properties  may be located,  or in such other place or places as the
Bank may  designate,  the whole or, from time to time, any part of the Borrowing
Base  Oil and Gas  Properties,  or any  interest  which  the  Borrower  may have
therein.  After deducting from the proceeds of sale or other  disposition of the
Borrowing  Base Oil and Gas  Properties  all expenses  (including all reasonable
expenses  for legal  services),  the Bank shall apply such  proceeds  toward the
satisfaction   of  the   Obligations.   Any  remainder  of  the  proceeds  after
satisfaction  in full of the  Obligations  shall be  distributed  as required by
applicable Laws.  Notice of any sale or other  disposition shall be given to the
Borrower  at least five (5) days  before  the time of any public  sale or of the
time after which any intended private sale or other disposition of the Borrowing
Base Oil and Gas  Properties  is to be made,  which the Borrower  hereby  agrees
shall be  reasonable  notice of such  sale or other  disposition.  The  Borrower
agrees to assemble, or to cause to be assembled,  at its own expense,  documents
evidencing  its ownership of the Borrowing  Base Oil and Gas Properties and such
other  documents  or items as the Bank may  reasonably  request at such place or
places as the Bank shall designate.  At any such sale or other disposition,  the
Bank may, to the extent permissible under applicable Laws, purchase the whole or
any part of the Borrowing  Base Oil and Gas  Properties,  free from any right of
redemption  on the part of the  Borrower,  which  right  is  hereby  waived  and
released.  Without  limiting  the  generality  of any of the rights and remedies
conferred upon the Bank under this  paragraph,  the Bank may, to the full extent
permitted by the applicable Laws:

              (A)    Enter upon the premises of the Borrower (and, to the extent
              necessary  in the  judgment  of the Bank,  exclude  therefrom  the
              Borrower or any Affiliate  thereof) and take immediate  possession
              of the Borrowing Base Oil and Gas Properties, either personally or
              by  means  of  a  receiver  appointed  by  a  court  of  competent
              jurisdiction, using all necessary force to do so;

              (B)    At the Bank's option, use, operate, manage, and control the
              Borrowing Base Oil and Gas Properties in any lawful manner;

              (C)    Collect and receive all rents, income,  revenue,  earnings,
              issues, and profits therefrom; and

                                       37
<PAGE>


              (D)    Maintain,  repair, renovate, alter, or remove the Borrowing
              Base Oil and Gas  Properties  as the Bank may  determine  in their
              discretion.

              7.05   RIGHT OF  SET-OFF.  Upon  the  occurrence  of any  Event of
Default, the Bank may, and is hereby authorized by the Borrower, at any time and
from time to time, to the fullest extent permitted by applicable  Laws,  without
advance  notice to the Borrower (any such notice being  expressly  waived by the
Borrower),  set-off and apply any and all deposits (general or special,  time or
demand, provisional or final) at any time held and any other indebtedness at any
time  owing by the Bank to or for the  credit  or the  account  of the  Borrower
against any or all of the Obligations of the Borrower now or hereafter existing,
whether or not such  Obligations  have matured and  irrespective  of whether the
Bank may have exercised any other rights that they have or may have with respect
to such Obligations, including, without limitation, any acceleration rights. The
Bank  agrees  promptly  to  notify  the  Borrower  after  any such  set-off  and
application,  provided that the failure to give such notice shall not affect the
validity  of such  set-off  and  application.  The rights of the Bank under this
Section  7.05 are in  addition  to the other  rights  and  remedies  (including,
without limitation, other rights of set-off) which the Bank may have.

                                  ARTICLE VIII.

                                  MISCELLANEOUS
                                  -------------

              8.01   SECURITY  INTERESTS  IN DEPOSITS AND RIGHT OF OFFSET OR THE
BANKER'S LIEN. The Borrower  hereby  transfers,  assigns and pledges to the Bank
and/or  grants to the Bank a security  interest  (as  security  for the  payment
and/or performance of the Obligations of the Borrower, with such interest of the
Bank to be retransferred,  reassigned and/or released by the Bank at the expense
of the Borrower upon payment in full and/or complete performance by the Borrower
of all  such  Obligations)  and  the  right,  exercisable  at  such  time as any
obligation  hereunder  shall  mature,  whether by  acceleration  of  maturity or
otherwise, of offset or banker's lien against all funds or other property of the
Borrower  now or  hereafter  or from  time to  time  on  deposit  with or in the
possession of the Bank,  including,  without  limitation,  all  certificates  of
deposit and other depository accounts.

              8.02   SURVIVAL OF REPRESENTATIONS,  WARRANTIES AND COVENANTS. All
representations  and warranties of the Borrower and all covenants and agreements
herein  made shall  survive  the  execution  and  delivery  of the Note and this
Agreement  and  shall  remain  in  force  and  effect  so  long  as any  debt is
outstanding under the Note, or any renewal or extension of this Agreement or the
Note, or the Bank remains obligated to make advances hereunder.

              8.03   NOTICES AND OTHER  COMMUNICATIONS.  Notices,  requests  and
communications  hereunder  shall be in writing  and shall be  sufficient  in all
respects  if  delivered  to the  relevant  address  indicated  below  (including
delivery by  registered  or  certified  United  States mail,  facsimile,  telex,
telegram or hand):

                                       38
<PAGE>


              (A)     If to the
                      Borrower:  c/o  TENGASCO, INC.
                                 603 Main Avenue, Suite 500
                                 Knoxville, Tennessee 37902
                                 Attention: Mr. M.E. Ratliff or
                                            Mr. Harold G. Morris

              (B)     If to the
                      Bank:      BANK ONE, NA
                                 910 Travis, 6th Floor
                                 Houston, Texas 77002
                                 Attention: Jonathan Gregory

              Any party may, by proper  written  notice  hereunder to the other,
change the individuals or addresses to which such notices to it shall thereafter
be sent.

              8.04   PARTIES IN INTEREST.  All covenants and  agreements  herein
contained by or on behalf of the Borrower shall be binding upon the Borrower and
its  successors  and  assigns  and  inure  to the  benefit  of the  Bank and its
successors and assigns.

              8.05   RENEWALS AND  EXTENSIONS.  All provisions of this Agreement
relating  to the Note shall  apply  with equal  force and effect to each and all
promissory  notes  hereafter  executed  which in whole  or in part  represent  a
renewal, extension, amendment,  modification or rearrangement of any part of the
Indebtedness originally represented by the Note.

              8.06   NO WAIVER BY THE BANK.  No course of dealing on the part of
the Bank,  its officers or employees,  nor any failure or delay by the Bank with
respect  to  exercising  any of its  rights,  powers or  privileges  under  this
Agreement, the Note, the Security Instruments,  or any other instrument referred
to herein or  executed  in  connection  with the Note shall  operate as a waiver
thereof. The rights and remedies of the Bank under this Agreement, the Note, the
Security Instruments,  or any other instrument referred to herein or executed in
connection  with the Note  shall  be  cumulative  and the  exercise  or  partial
exercise  of any such right or remedy  shall not  preclude  the  exercise of any
other right or remedy.

              No advance of Loan proceeds hereunder shall constitute a waiver of
any of the covenants or warranties of the Borrower contained herein or of any of
the conditions to the Bank's obligation to make further advances  hereunder.  In
the event that the Borrower is unable to satisfy any such covenant,  warranty or
condition,  no such advance of Loan proceeds shall have the effect of precluding
the Bank from  thereafter  declaring such inability to be an Event of Default as
hereinabove provided.

                                       39
<PAGE>


              8.07   WAIVER,  RELEASE,  AND INDEMNIFICATION BY THE BORROWER.  To
the maximum extent permitted by applicable Laws, the Borrower:

              (A)    Waives (1) protest of all commercial paper at any time held
              by the Bank on which the Borrower is in any way liable; (2) except
              as  the  same  may  herein  be  specifically  granted,  notice  of
              acceleration  and  intention  to  accelerate;  and (3)  notice and
              opportunity to be heard, after acceleration in the manner provided
              in Section  7.03,  before  exercise by the Bank of the remedies of
              self-help,  set-off,  or of other summary procedures  permitted by
              any applicable  Laws or by any agreement  with the Borrower,  and,
              except where required hereby or by any applicable Laws,  notice of
              any other action taken by the Bank;

              (B)    Releases the Bank and its officers,  employees,  directors,
              attorneys, and agents (collectively,  the "Bank Parties") from all
              claims  for loss or damage  caused by any act or  omission  on the
              part of any of them except willful misconduct or gross negligence;
              and

              (C)    Agrees to indemnify and hold the Bank Parties harmless from
              and against all claims, damages,  liabilities and expenses,  known
              or unknown, accrued and unaccrued, unless attributable to the Bank
              Parties' own gross negligence or willful misconduct,  that may now
              or  hereafter  be  asserted  against  any of the Bank  Parties  in
              connection   with  or  arising  out  of  (i)  any   investigation,
              litigation  or proceeding  directly or  indirectly  relating to or
              arising  out  of  any of the  transactions  contemplated  by  this
              Agreement or (ii) the Nishiwaki Note.

              8.08   GOVERNING  LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED
TO BE  CONTRACTS  MADE  UNDER  AND SHALL BE  CONSTRUED  IN  ACCORDANCE  WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

              8.09   INCORPORATION  OF EXHIBITS AND SCHEDULES.  The Exhibits and
Schedules  attached to this Agreement are  incorporated  herein for all purposes
and shall be considered a part of this Agreement.

              8.10   SURVIVAL  UPON  UNENFORCEABILITY.  In the  event any one or
more of the  provisions  contained  in this  Agreement,  the Note,  the Security
Instruments,  or in any other  instrument  referred  to herein  or  executed  in
connection with the Note shall, for any reason,  be held to be invalid,  illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof or of any other instrument  referred
to herein or executed in connection herewith.

              8.11   RIGHTS OF THIRD PARTIES.  All provisions herein are imposed
solely and  exclusively  for the benefit of the Bank,  the Borrower and no other
Person  shall  have  standing  to require  satisfaction  of such  provisions  in
accordance with their terms or be entitled to assume that

                                       40
<PAGE>


the Bank will refuse to make advances in the absence of strict  compliance  with
any or all thereof  and any or all of such  provisions  may be freely  waived in
whole or in part by the Bank at any time if in its sole  discretion  it deems it
advisable to do so.

              8.12   AMENDMENTS OR MODIFICATIONS. Neither this Agreement nor any
provision hereof may be changed,  waived,  discharged or terminated  orally, but
only by an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought.

              8.13   AGREEMENT  CONSTRUED AS AN ENTIRETY.  This  Agreement,  for
convenience  only,  has  been  divided  into  Articles  and  Sections  and it is
understood that the rights, powers, privileges, duties and other legal relations
of the parties hereto shall be determined from this Agreement as an entirety and
without regard to the aforesaid  division into Articles and Sections and without
regard to headings prefixed to said Articles or Sections.

              8.14   NUMBER AND GENDER. Whenever the context requires, reference
herein made to the single  number shall be  understood to include the plural and
likewise the plural shall be understood to include the singular.  Words denoting
sex shall be construed to include the masculine, feminine, and neuter, when such
construction  is  appropriate,  and specific  enumeration  shall not exclude the
general, but shall be construed as cumulative.

              8.15   AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS.  THIS AGREEMENT,
TOGETHER  WITH  THE  NOTE,  THE  SECURITY  INSTRUMENTS,  AND ANY  OTHER  WRITTEN
INSTRUMENTS  EXECUTED PURSUANT TO THIS AGREEMENT  REPRESENT,  COLLECTIVELY,  THE
FINAL  AGREEMENT  BETWEEN THE PARTIES  HERETO WITH RESPECT TO THE SUBJECT HEREOF
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES AND SHALL  SUPERSEDE ANY PRIOR AGREEMENT  BETWEEN
THE PARTIES  HERETO,  WHETHER  WRITTEN OR ORAL,  RELATING TO THE SUBJECT HEREOF.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

              8.16   CONTROLLING  PROVISION  UPON  CONFLICT.  In the  event of a
conflict  between the  provisions of this  Agreement and those of the Note,  the
Security  Instruments or any other instrument  referred to herein or executed in
connection  with the Note,  the  provisions  of this  Agreement  shall  control;
provided  if  any of  the  Security  Instruments  contain  any  representations,
warranties,  or covenants  of the  Borrower  that are in addition to or are more
restrictive  on the  Borrower  than  those  set  forth in this  Agreement,  such
additional or more restrictive representations,  warranties, and covenants shall
control.

              8.17   TIME, PLACE AND METHOD OF PAYMENTS.  All payments  required
pursuant to this  Agreement or the Note shall be made in  immediately  available
funds; shall be deemed received

                                       41
<PAGE>


by the Bank on the next Business Day following  receipt if such receipt is after
2:00 p.m.,  on any  Business  Day,  and shall be made at the  principal  banking
quarters of the Bank.

              8.18   TERMINATION.  This  Agreement and the Revolving  Commitment
may be  canceled  by the  Borrower  without  premium  or  penalty  prior  to the
Revolving  Loan  Termination  Date upon at least thirty (30) days' prior written
notice,  PROVIDED,  that the  Obligations  are paid and performed in full to the
sole  satisfaction  of the Bank;  PROVIDED,  HOWEVER that any such  cancellation
hereunder shall not terminate any obligations,  representations or warranties of
the Borrower to the Bank  hereunder and under other Loan  Documents that survive
beyond the Revolving Loan Termination Date. Upon the earlier to occur of the (i)
the Revolving Loan Termination Date, and (ii) cancellation of this Agreement and
the Revolving  Commitment prior thereto in accordance with this Section 8.18 and
upon payment and performance in full of the Obligations to the sole satisfaction
of the  Bank,  the Bank  agrees,  at the  Borrower's  request  and sole cost and
expense,  to execute  and  deliver  any such lien  release  documents  and other
documentation  reasonably  requested by the Borrower to release or terminate the
Bank's  liens  and  security  interests  hereunder  and  under  the  other  Loan
Documents.

              8.19   NON-APPLICATION  OF CHAPTER 346 OF TEXAS FINANCE CODE.  The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties  hereto not to be applicable  to this  Agreement or any of the other
Security Instruments or to the transactions contemplated hereby.

              8.20   COUNTERPART  EXECUTION.  This  Agreement may be executed as
one instrument signed by all parties or in separate counterparts hereof, each of
which  counterparts  shall be  considered  an original and all of which shall be
deemed  to be one  instrument,  and  any  signed  counterpart  shall  be  deemed
delivered  by the  party  signing  it if  sent  to any  other  party  hereto  by
electronic facsimile transmission.

            [the remainder of this page was intentionally left blank]

                                       42
<PAGE>


              IN WITNESS  WHEREOF,  this  Agreement  is  executed as of the date
first above written.


                                         BORROWER

                                         TENGASCO, INC.


                                         By: /s/ M.E. Ratliff
                                            ------------------------------------
                                            M.E. Ratliff,
                                            Chief Executive Officer


                                         TENNESSEE LAND & MINERAL
                                         CORPORATION


                                         By:  /s/ M.E. Ratliff
                                            ------------------------------------
                                            M.E. Ratliff,
                                            Chief Executive Officer


                                         TEGASCO PIPELINE CORPORATION


                                         By:  /s/ M.E. Ratliff
                                            ------------------------------------
                                            M.E. Ratliff,
                                            Chief Executive Officer


                                         BANK

                                         BANK ONE, NA


                                         By:  /s/ Jonathan Gregory
                                            ------------------------------------
                                            Jonathan Gregory
                                            Vice President

                                       43
<PAGE>


                                   EXHIBIT "A"

                                 BORROWING BASE
                             OIL AND GAS PROPERTIES
                             ----------------------

              This Exhibit sets forth the  description of the Borrowing Base Oil
& Gas Properties covered by the Agreement to which this Exhibit is attached. All
of the terms  defined in the  Agreement  are used in this  Exhibit with the same
meanings given therein.

              This Exhibit and the Agreement cover and include the following:

       (a)    All of Borrower's right, title and interest in and to the oil, gas
       and mineral leases described herein and/or lands described in and subject
       to such oil, gas and mineral leases (regardless, as to such leases and/or
       lands, of any surface  acreage and/or depth  limitations set forth in any
       description  of any of such  oil,  gas and  mineral  leases),  and all of
       Borrower's  right,  title and  interest in and to any of the oil, gas and
       minerals in, on or under the lands,  if any,  described on this  Exhibit,
       including,  without  limitation,  all contractual  rights, fee interests,
       leasehold  interests,  overriding  royalty  interests,  non-participating
       royalty interests,  mineral interests,  production payments,  net profits
       interests, or any other interest measured by or payable out of production
       of oil, gas or other minerals from the oil, gas and mineral leases and/or
       lands described herein; and

       (b)    All of the foregoing  interests of the Borrower as such  interests
       may be enlarged by the  discharge of any payments out of production or by
       the removal of any charges or  encumbrances  together with the Borrower's
       interests in, to and under or derived from all renewals and extensions of
       any oil, gas and mineral leases described herein,  it being  specifically
       intended  hereby  that any new oil and gas lease (i) in which an interest
       is acquired by the Borrower  after the  termination  or expiration of any
       oil and gas lease,  the  interests  of the  Borrower  in, to and under or
       derived from which are subject to the lien and security  interest hereof,
       and (ii) that  covers all or any part of the  property  described  in and
       covered by such terminated or expired leases,  shall, to the extent,  and
       only to the extent such new oil and gas lease may cover such property, be
       considered a renewal or extension of such  terminated  or expired  lease;
       and

       (c)    All right,  title and  interest  of  Borrower  in, to and under or
       derived from any operating, farmout, and bidding agreements,  assignments
       and subleases,  whether or not described in this Exhibit,  to the extent,
       and only to the extent,  that such agreements,  assignments and subleases
       (i) cover or  include  any of the  Borrower's  present  right,  title and
       interest in and to the leases and/or lands described in this Exhibit,  or
       (ii) cover or include any other undivided interests now or hereafter held
       by the  Borrower  in, to and under the  described  leases  and/or  lands,
       including, without

                                        1
<PAGE>


       limitation,  any  future  operating,   farmout  and  bidding  agreements,
       assignments,  subleases  and  pooling,  unitization  and  communitization
       agreements and the units created thereby  (including,  without limitation
       all units formed under orders, regulations,  rules or other official acts
       of any governmental body or agency having jurisdiction) to the extent and
       only to the extent that such agreements, assignments, subleases, or units
       cover or include the described leases and/or lands; and

       (d)    All right, title, and interest of the Borrower in, to and under or
       derived  from  all  presently   existing  and  future   advance   payment
       agreements,  oil, casinghead gas and gas sales,  exchange, and processing
       contracts and agreements including,  without limitation,  those contracts
       and agreements that are described on this Exhibit to the extent, and only
       to the  extent,  those  contracts  and  agreements  cover or include  the
       described leases and/or lands herein; and

       (e)    All right,  title and interest of the Borrower in, to and under or
       derived from all existing and future  permits,  licenses,  easements  and
       similar rights and privileges that relate to or are appurtenant to any of
       the described leases and/or lands.

              Notwithstanding  the  intention of this  Agreement to cover all of
the right,  title and interest of Borrower in and to the described leases and/or
lands,  except  as  expressly  set forth  herein  Borrower  hereby  specifically
warrants  and  represents  that the  interests  covered by this  Exhibit are not
greater  than the  working  interest  nor less  than the net  revenue  interest,
overriding royalty interest, net profit interest, production payment interest or
other interest  payable out of or measured by production set forth in connection
with each oil and gas well described in this Exhibit.  In the event the Borrower
owns any other or  greater  interest,  such  additional  interest  shall also be
covered by and included in this Agreement. The designation "Working Interest" or
"W.I." means an interest owned in an oil, gas, and mineral lease that determines
the cost bearing percentage of the owner of such interest.  The designation "Net
Revenue  Interest" or "NRI" means net revenue  interest,  or that portion of the
production  attributable to the owner of a working  interest after deduction for
all royalty burdens, overriding royalty burdens, or other burdens on production,
except  severance,  production,  windfall  profits and other similar taxes.  The
designation  "Overriding  Royalty  Interest"  or  "ORRI"  means an  interest  in
production  which is free of any  obligation  for the  expense  of  exploration,
development  and  production,  bearing  only  its pro rata  share of  severance,
production, windfall profits and other similar taxes.

                                       2
<PAGE>


                                   EXHIBIT "B"

                                 REVOLVING NOTE
                                 --------------

$35,000,000.00                   Houston, Texas                 November 8, 2000

       On the dates hereinafter prescribed, for value received,  TENGASCO, INC.,
a  Tennessee  corporation,  TENNESSEE  LAND & MINERAL  CORPORATION,  a Tennessee
corporation,  and TENGASCO PIPELINE CORPORATION, a Tennessee corporation (herein
called  collectively,  the  "Borrower"),  having an address at 603 Main  Avenue,
Suite 500, Knoxville, Tennessee 37902, promises to pay to the order of BANK ONE,
NA (herein  called  "Bank"),  at its  principal  offices  at 910 Travis  Street,
Houston,  Harris County,  Texas 77002,  (i) the principal  amount of THIRTY-FIVE
MILLION AND NO/100 DOLLARS  ($35,000,000.00)  or the principal  amount  advanced
pursuant to the terms of the Credit Agreement (defined herein) as of the date of
maturity  hereof,  whether by  acceleration  or otherwise,  whichever may be the
lesser,  and (ii) interest on the  principal  balance from time to time advanced
and remaining  unpaid from the date of the advance  until  maturity at a rate of
interest  equal to lesser of (a) the  "Floating  Rate" (as defined in the Credit
Agreement)  calculated  on the  basis of a year of 360  days and for the  actual
number of days elapsed  (including the first day but excluding the last day), or
(b) the  Maximum  Rate (as  defined in the Credit  Agreement).  Any  increase or
decrease in interest rate  resulting  from a change in the Maximum Rate shall be
effective immediately when such change becomes effective,  without notice to the
Borrower,  unless  Applicable Law (as defined below) requires that such increase
or decrease not be effective until a later time, in which event such increase or
decrease shall be effective at the earliest time permitted  under the provisions
of such law.

       Notwithstanding  the  foregoing,  if during any period the Floating  Rate
exceeds the applicable Maximum Rate, the rate of interest in effect on this Note
shall be limited to the Maximum Rate during each such  period,  but at all times
thereafter the rate of interest in effect on this Note shall be the Maximum Rate
until the total amount of interest  accrued on this Note equals the total amount
of interest  which would have  accrued  hereon if the  Floating  Rate had at all
times been in effect.

       All payments on this Note shall be applied first to accrued  interest and
the balance, if any, to principal.

       "Applicable  Law"  means  that  law in  effect  from  time  to  time  and
applicable to this Note which  lawfully  permits the charging and  collection of
the  highest  permissible  lawful,  non-usurious  rate of interest on this Note,
including  laws of the State of Texas and laws of the United  States of America.
It is intended  that Chapter 303 of the Texas  Finance Code shall be included in
the  laws of the  State  of Texas in  determining  Applicable  Law;  and for the
purpose  of  applying  said  Chapter  303 to this  Note,  the  interest  ceiling
applicable  to this Note under said  Chapter 303 shall be the  indicated  weekly
rate ceiling from time to time in effect. The Borrower and the Bank hereby agree

                                                             -------------------
                                                             Borrower's Initials

                                       1
<PAGE>


that Chapter 346 of the Texas Finance Code,  shall not apply to this Note or the
loan  transaction   evidenced  by,  and  referenced  in,  the  Credit  Agreement
(hereinafter  defined)  in any  manner,  including  without  limitation,  to any
account or arrangement evidenced or created by, or provided for in, this Note.

       This  Note is a  revolving  credit  note and it is  contemplated  that by
reason of prepayments  hereon there may be times when no  indebtedness  is owing
hereunder; but notwithstanding such occurrence, this Note shall remain valid and
in full force and effect as to each principal advance made hereunder  subsequent
to each such  occurrence.  Each  principal  advance and each payment hereof made
pursuant to this Note shall be reflected by the Bank's records and the aggregate
unpaid amounts reflected by such records shall constitute rebuttably presumptive
evidence of the principal and unpaid,  accrued interest remaining outstanding on
this Note.

       The  principal  sum of this Note,  after  giving  credit  for  unadvanced
principal,  if any, remaining at final maturity,  shall be due and payable on or
before November 8, 2004;  interest to accrue upon the principal sum from time to
time  owing  and  unpaid   hereunder   shall  be  due  and  payable  in  monthly
installments, as it accrues, with the first such monthly installment of interest
hereon being due and payable on the first day of November,  2001,  and with such
subsequent  installments  of interest  being due and payable on the first day of
each succeeding month thereafter;  provided,  however,  the final installment of
interest  hereunder  shall be due and payable not later than the maturity of the
principal sum hereof, howsoever such maturity may be brought about.

       When the first  (1st) day of a  calendar  month  falls  upon a  Saturday,
Sunday or legal holiday, the payment of interest and principal, if any, due upon
such date shall be due and payable upon the next succeeding Business Day.

       In no event shall the  aggregate of the  interest on this Note,  plus any
other  amounts  paid in  connection  with the loan  evidenced by this Note which
would under Applicable Law be deemed  "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this Note.
The Bank and the Borrower  specifically  intend and agree to limit contractually
the interest  payable on this Note to not more than an amount  determined at the
Maximum Rate. Therefore, none of the terms of this Note or any other instruments
pertaining to or securing this Note shall ever be construed to create a contract
to pay  interest  at a rate in excess  of the  Maximum  Rate,  and  neither  the
Borrower nor any other party liable herefor shall ever be liable for interest in
excess of that  determined  at the  Maximum  Rate,  and the  provisions  of this
paragraph  shall  control  over  all  provisions  of this  Note or of any  other
instruments pertaining to or securing this Note. If any amount of interest taken
or  received  by the Bank shall be in excess of the  maximum  amount of interest
which,  under  Applicable  Law, could lawfully have been collected on this Note,
then the excess shall be deemed to have been the result of a mathematical  error
by the  parties  hereto and shall be  refunded  promptly  to the  Borrower.  All
amounts paid or agreed to be paid in connection with the indebtedness  evidenced
by this Note which would under Applicable Law be deemed

                                                             -------------------
                                                             Borrower's Initials


                                       2
<PAGE>


"Interest"  shall,  to the extent  permitted by  Applicable  Law, be  amortized,
prorated, allocated and spread throughout the full term of this Note.

       This Note is secured by all security agreements,  collateral assignments,
mortgages and lien instruments  executed by the Borrower (or by any other party)
in  favor of Bank,  including  those  executed  simultaneously  herewith,  those
executed heretofore and those hereafter executed, and including specifically and
without  limitation  the  Security  Instruments  described  and  defined in that
certain  Credit  Agreement of even date herewith  between  Borrower and the Bank
(the "Credit Agreement").

       This Note is the Revolving Note issued pursuant to the Credit  Agreement.
Reference is hereby made to the Credit  Agreement  for a statement of the rights
and obligations of the holder of this Note and the duties and obligations of the
Borrower in relation thereto; but neither this reference to the Credit Agreement
nor any provisions thereof shall affect or impair the absolute and unconditional
obligation of the Borrower to pay any  outstanding  and unpaid  principal of and
interest  on this Note  when due,  in  accordance  with the terms of the  Credit
Agreement.  Each advance and each  payment  made  pursuant to this Note shall be
reflected by notations made by the Bank on its records and the aggregate  unpaid
amounts  reflected  by the  notations on the records of the Bank shall be deemed
rebuttably presumptive evidence of the principal amount owing under this Note.

       In the event of default in the payment  when due of any of the  principal
of or any interest on this Note,  or in the event of default  under the terms of
the Credit Agreement or any of the Security Instruments,  or if any event occurs
or condition  exists which  authorizes the  acceleration of the maturity of this
Note under any agreement made by the Borrower, the Bank (or other holder of this
Note) may, at its  option,  without  presentment  or demand or any notice to the
Borrower  or any other  person  liable  herefor,  declare  the unpaid  principal
balance of and accrued interest on this Note to be immediately due and payable.

       If this Note is  collected  by suit or through the Probate or  Bankruptcy
Court,  or any  judicial  proceeding,  or if this Note is not paid at  maturity,
however  such  maturity may be brought  about,  and is placed in the hands of an
attorney  for  collection,  then  the  Borrower  agrees  to pay  reasonable  and
documented  attorneys'  fees, not to exceed ten percent (10%) of the full amount
of principal  and  interest  owing hereon at the time this Note is placed in the
hands of an attorney.

       The Borrower  agrees that the  obligations of each are joint and several.
The Borrower  and all  sureties,  endorsers  and  guarantors  of this Note waive
demand,  presentment  for  payment,  notice of  nonpayment,  protest,  notice of
protest,  notice of intent to accelerate  maturity,  notice of  acceleration  of
maturity, and all other notices, filing of suit and diligence in collecting this
Note or enforcing any of the security  herefor,  and agree to any  substitution,
exchange or release of any such  security or the release of any party  primarily
or  secondarily  liable hereon and further  agrees that it will not be necessary
for the  Bank,  in order  to  enforce  payment  of this  Note by them,  to first
institute

                                                             -------------------
                                                             Borrower's Initials


                                       3
<PAGE>


suit or exhaust its remedies  against any Borrower or others liable herefor,  or
to enforce its rights  against any security  herefor,  and consent to any one or
more extensions or postponements of time of payment of this Note on any terms or
any other  indulgences  with respect  hereto,  without  notice thereof to any of
them. The Bank may transfer this Note, and the rights and privileges of the Bank
under  this Note  shall  inure to the  benefit  of the  Bank's  representatives,
successors or assigns.

              Executed this 8th day of November, 2001.


                                        TENGASCO, INC.


                                        By:
                                           --------------------------------
                                        Name:
                                             ------------------------------
                                        Title:
                                              -----------------------------


                                        TENNESSEE LAND & MINERAL
                                        CORPORATION


                                        By:
                                           --------------------------------
                                        Name:
                                             ------------------------------
                                        Title:
                                              -----------------------------


                                        TENGASCO PIPELINE CORPORATION


                                        By:
                                           --------------------------------
                                        Name:
                                             ------------------------------
                                        Title:
                                              -----------------------------

                                       4
<PAGE>


                                   EXHIBIT "C"

                             COMPLIANCE CERTIFICATE
                             ----------------------


              We, the undersigned  officers of TENGASCO,  INC., TENNESSEE LAND &
MINERAL  CORPORATION,  AND  TENGASCO  PIPELINE  CORPORATION  (collectively,  the
"Company"),  pursuant  to  Section  5.05 of the  Credit  Agreement  dated  as of
November  8, 2001,  by and among BANK ONE,  NA  ("Bank")  and the  Company  (the
"Agreement") do hereby certify, as of the date hereof, that to my knowledge:

       1.     No Event of Default (as defined in the Agreement) has occurred and
              is  continuing,  and no Unmatured  Event of Default (as defined in
              the  Agreement)  has  occurred and is  continuing  [except for the
              following events (include actions taken to cure such situations):

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ----------------------------------------------------------------];

       2.     No  material   adverse   change  has  occurred  in  the  business,
              prospects,  financial  condition,  or the results of operations of
              the Company  since the date of the previous  Financial  Statements
              (as defined in the Agreement)  provided to Bank [except as follows
              (include actions taken to address such changes):

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ----------------------------------------------------------------];

       3.     Except as  otherwise  stated  in the  Schedule,  if any,  attached
              hereto,  each of the representations and warranties of the Company
              contained  in Article IV of the  Agreement  is true and correct in
              all respects  [except for the  following  (include  actions  being
              taken to cure such situations):

                                       1
<PAGE>



              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ------------------------------------------------------------------

              ----------------------------------------------------------------];

       4.     The Company's financial condition for the period ending __________
              is as follows:

                                 DATE OR        REQUIRED                ACTUAL
                                 TIME           RATIO OR                RATIO OR
       FINANCIAL COVENANT        PERIOD         AMOUNT                  AMOUNT

(a)    CONSOLIDATED TANGIBLE     Term of Loan   not < $18,000,000.00    ________
       NET WORTH                                plus the sum of 50% of
                                                Borrower's positive
                                                quarterly net income,
                                                if any, calculated in
                                                accordance with GAAP
                                                as of the end of each
                                                fiscal quarter
                                                beginning with the
                                                quarter ending
                                                December 31, 2001, and
                                                100% of any increase
                                                in shareholder's
                                                equity from the sale
                                                of stock in Borrower
                                                subsequent to November
                                                8, 2001

(b)    Current Ratio for any     Term of Loan   not < 1.00 to 1.00      ________
       fiscal quarter

(c)    Debt Service Coverage     Term of Loan   not < 1.25 to 1.00      ________
       Ratio for any fiscal
       quarter

(d)    General and               Term of Loan   Not > $750,000 per      ________
       Administrative                           fiscal quarter
       Expenses

                                  2
<PAGE>


       This certificate is executed this 8th day of November, 2001.

                                           TENGASCO, INC.

                                           By:
                                              --------------------------------
                                           Name:
                                                ------------------------------
                                           Title:
                                                 -----------------------------


                                           TENNESSEE LAND & MINERAL
                                           CORPORATION

                                           By:
                                              --------------------------------
                                           Name:
                                                ------------------------------
                                           Title:
                                                 -----------------------------


                                           TEGASCO PIPELINE CORPORATION

                                           By:
                                              --------------------------------
                                           Name:
                                                ------------------------------
                                           Title:
                                                 -----------------------------



                                  3
<PAGE>


                              EXHIBIT "D"

                         SECURITY INSTRUMENTS
                         --------------------


       The  Security  Instruments   securing  the  Borrower's   Obligations  and
Indebtedness to the Bank shall include the following, each in form and substance
satisfactory to the Bank:

1.     ACT OF MORTGAGE,  SECURITY  AGREEMENT,  FIXTURE  FILING AND ASSIGNMENT OF
PRODUCTION covering Borrower's Borrowing Base Oil and Gas Properties.

2.     SECURITY  AGREEMENT  granting the Bank a first priority security interest
in all of the  Borrower's  personal  property  assets,  including  its accounts,
equipment, machinery, fixtures, inventory, chattel paper, documents, instruments
and  general  intangibles,  whether  now owned or  hereafter  acquired,  and all
products and proceeds thereof.

3.     FINANCING   STATEMENTS  in  connection  with  the  Security   Instruments
described in the preceding  paragraphs,  in form and number  satisfactory to the
Bank  as  the  Bank,  from  to  time,  may  specify  (including   additional  or
supplemental   financing   statements,   amendments  thereto,  and  continuation
statements thereof).

4.     OTHER SECURITY  INSTRUMENTS.  Such other  instruments as are necessary or
appropriate from time to time, in the good faith opinion of the Bank, to perfect
to the satisfaction of the Bank the Bank's liens, security interests,  and other
rights in the  Borrowing  Base Oil and Gas  Properties  and in any and all other
collateral  covered by or  described  in (or,  as  evidenced  by the  Agreement,
intended  to  have  been  covered  by)  any of the  other  Security  Instruments
described above.

POWER OF  ATTORNEY.  To the  fullest  extent  permitted  by Law and  until  this
Agreement is terminated in  accordance  with Section 8.18 therein,  the Borrower
hereby appoints the Bank as its attorney-in-fact  (without requiring the Bank to
act as such) to execute any Security Instrument in the name of the Borrower, and
to perform all other acts that the Bank deem appropriate to perfect and continue
its liens, security interests, and other rights in, and to protect and preserve,
the Borrowing  Base Oil and Gas Properties  and other  collateral  covered by or
described in (or, as evidenced by the  Agreement,  intended to have been covered
by) any of the  Security  Instruments  described  above,  but only to the extent
required of Borrower under the terms of this Agreement.

                                       1

<PAGE>


SCHEDULE 4.01


STATES IN WHICH BORROWER IS INCORPORATED OR QUALIFIED TO DO BUSINESS

Tengasco, Inc.
      Incorporated in Tennessee
      Qualified to do Business in Kansas
Subsidiaries of Tengasco, Inc.:
Tengasco Pipeline Corporation
      Incorporated in Tennessee
Tennessee Land & Mineral Corporation
      Incorporated in Tennessee


ADDRESSES OF ALL PLACES OF BUSINESS


Tengasco, Inc.
      In Tennessee:
             603 Main Ave. Suite 500
             Knoxville, TN 37902

             P. O. Box 177A
             301 N. Main (Highway 31)
             Sneedville, TN 37869


      In Kansas:
             1327 Noose Rd.
             Hays, KS 67601


Subsidiaries of Tengasco, Inc.:
Tengasco Pipeline Corporation
      In Tennessee:
             603 Main Ave., Suite 500
             Knoxville, TN 37902

Tennessee Land & Mineral Corporation
      In Tennessee:
             603 Main Ave., Suite 500
             Knoxville, TN 37902
<PAGE>


                            4.10 - LIST OF PURCHASERS
                                       OF
                                   PRODUCTION


Eastman Chemical Company
Attn:  Accts Payable
P. O. Box 511
Kingsport, TN 37660


BAE Systems Ordnance Systems, Inc.
Holston Army Ammunition Plant
4509 West Stone Drive
Kingsport, TN 37660


South Kentucky Purchasing Company, Inc.
P. O. Box 1547    600 Monticello Street
Somerset, KY  42501


ONEOK Field Services Company
A Subsidiary of ONEOK, Inc.
P. O. Box 871
Tulsa, OK  74102-0871


National Cooperative Refinery Association
Attn:  Crude Oil Accounting
P. O. Box 1404
McPherson, KS  67460-1404

<PAGE>


Schedule 4.14   Litigation

          Except  as  described  hereafter,  the  Company  is not a party to any
pending material legal proceeding.  To the knowledge of management,  no federal,
state or local  governmental  agency is presently  contemplating  any proceeding
against the Company which would have a result materially adverse to the Company.
To the knowledge of management,  no director,  executive officer or affiliate of
the Company or owner of record or  beneficially of more than 5% of the Company's
common  stock is a party  adverse  to the  Company  or has a  material  interest
adverse to the Company in any proceeding.

     1.   The  Company  and  its  wholly  owned  subsidiary,  Tengasco  Pipeline
Corporation ("TPC"),  were named as defendants in an action commenced on June 4,
2001 by C.H.  Fenstermaker  & Associates,  Inc.  ("Fenstermaker")  in the United
States District for the Eastern District of Tennessee entitled C.H. Fenstermaker
& Associates, Inc. v. Tengasco, Inc., No. 3:01-CV-283.

          The action seeks to recover approximately $365,000 in fees and charges
billed to TPC for  engineering  services  Fenstermaker  claims it  performed  in
connection  with the  planning  and  construction  of Phase II of the  Company's
pipeline  which runs from  Rogersville,  TN to  Kingsport,  TN to serve  Eastman
Chemical  Company and Holston  Army  Ammunition  Plant.  On June 25,  2001,  the
Company  and TPC filed an  answer to the  complaint  denying  liability  for the
billings  claimed,  and  counterclaiming  against Caddum,  Inc.  ("Caddum"),  an
unincorporated  division of Fenstermaker.  The counterclaim  seeks recovery from
Caddum of damages for breach of contract and breach of professional  engineering
standards  caused by the actions of Caddum,  including  unauthorized  deviations
from the pipeline route that caused the Company to incur significant  additional
costs.  These  costs  included  substantial  fees for  concrete  capping  of the
pipeline  as a result of the  pipeline  being  placed to close to the  adjoining
highway right of way. The  counterclaim  further alleges that Caddum damaged the
Company:  by causing  delays in  completing  the  pipeline  by failing to submit
engineering drawings and failing to timely obtain certain x-rays of the pipeline
welds;  its  unauthorized  actions in  ordering  supplies  and  materials;  and,
overbilling  from  the  agreed  contract  rate  for  engineering  services.  The
counterclaim seeks actual damages from Caddum of approximately $475,000,  treble
damages under state law for the overbilling,  and damages to the Company arising
from the delay caused by Caddum in the production  from the Swan Creek field all
in the aggregate  amount of $1.25 million.  The District Court has scheduled the
case for a non-jury  trial on June 19, 2002 before  Judge James H.  Jarvis.  The
Company  believes its  counterclaims  are  meritorious and intends to vigorously
prosecute them and anticipates that, at a minimum, its counterclaims will either
fully  offset or  substantially  reduce  exposure to  liability  for the amounts
claimed by Fenstermaker.

     2.   TENGASCO  PIPELINE  CORPORATION  V. JAMES E. LARKIN AND  KATHLEEN A. O
CONNOR, No. 4929J in the Circuit Court for Hawkins County,  Tennessee. This is a
condemnation  proceeding  brought by Tengasco Pipeline  Corporation to acquire a
temporary

<PAGE>


construction  easement  and  permanent  right of way to  maintain  and operate a
portion of Phase I of the Company's pipeline in Hawkins County,  Tennessee.  The
court  granted an order of  possession  to the Company in January,  1998 and the
pipeline has been constructed  across  approximately  3,000 feet of the property
concerned in a rural and very steep locale. The Company has had the right of way
appraised at $4,000.  The  landowners,  Mr.  Larkin and Kathleen A. O Connor who
both live on the property, contest the appraised value of the property and claim
incidental  damages  to  certain  fish  ponds  located  on their  property.  The
landowners,  despite  a lack of  evidence  of any fish  raising  or  aquaculture
business actually being or having been operated on the premises or of any actual
losses to such  business,  have  counterclaimed  for  $867,585  in  compensatory
damages and $2.6 million in punitive  damages  arising  from  trespass and other
legal  theories.  The Court  required  the  parties to  attempt to mediate  this
dispute and the mediation occurred in December, 2000. The parties were unable to
reach a mediated  settlement  and the matter is  expected  to go to trial in the
summer or fall of 2001.  The  discovery  conducted to date has not disclosed any
facts that reasonably suggest any likelihood of a substantial  adverse result in
this matter, and the Company intends to vigorously defend the allegations of the
counterclaim which appear to be without any credible basis.

     3.   The Company, its Chief Executive Officer,  Malcolm E. Ratliff, and one
of its attorneys,  Morton S. Robson,  have been named as defendants in an action
commenced  in the  Supreme  Court of the  State  of New  York,  New York  County
entitled MAUREEN COLEMAN, JOHN O. KOHLER, CHARLES MASSOUD,  JONATHAN SARLIN, VON
GRAFFENRIED A.G. AND VPM VERWATUNGS A.G.,  PLAINTIFFS V. TENGASCO,  INC., MORTON
S. ROBSON AND  MALCOLM E.  RATLIFF,  DEFENDANTS,  INDEX NO.  603009/98.  In that
action,  the  plaintiffs,  shareholders  of the Company each of which  purchased
restricted shares of the Company's Common Stock,  allege that although they were
entitled to sell their shares pursuant to SEC Rule 144 in the open market,  they
were precluded from doing so by the defendants'  purported  wrongful  refusal to
remove the  restrictive  legend from their  shares.  The  plaintiffs  own in the
aggregate  35,000  shares of the  Company's  common stock.  The  plaintiffs  are
seeking  damages in an amount  equal to the  difference  between the amount they
would have been able to sell their shares if the  plaintiffs had acted to remove
the  restrictive  legends when requested and the amount they will receive on the
sale of their shares.  The  plaintiffs are also seeking  punitive  damages in an
amount they claim to be in excess of $500,000 together with interest,  costs and
disbursements of bringing the action,  including  reasonable attorneys fees.

          The Company  believes that there are several  substantial  factual and
legal  issues as to the date on which the  shareholders  were  entitled  to sell
their stock pursuant to Rule 144.  Management  further believes that the Company
did not  wrongfully  withhold  its  approval of the  removal of the  restrictive
legends at the times such removal was requested by the shareholders. However, in
the event the Company is found to have  improperly  withheld its  permission  to
remove the restrictive  legends from the shares owned by the  shareholders,  the
Company may be held liable for damages to the shareholders in an amount equal to
the difference  between the actual sale price of such shares and the sales price
they would have realized on the date such restrictive legends

<PAGE>


should have been  permitted  to be removed.  As this time it is not  possible to
ascertain with any certainty what such damages would be.

     4.   Tengasco  Pipeline  Corporation  is a party to a  binding  arbitration
proceeding  pursuant to its  construction  contract with King Pipeline & Utility
Company,  Inc. to construct  Phase II of its pipeline.  The arbitration was held
October 10,  2001 under  procedures  of and by an  arbitrator  appointed  by the
American  Arbitration  Association.  The ruling of the arbitrator is expected in
the next thirty days. Tengasco's position is that (1) straw matting done by King
on  slopes  was  extra  work,  and  King is  entitled  to be  paid no more  than
$14,630.14 for 104,501 square feet of straw matting on slopes,  calculated at 14
cents per square foot rather than the two dollars per square foot sought by King
; (2) King should  refund to Tengasco the $72,500  mistakenly  paid for clearing
and grubbing that was never  performed by King because the pipeline took another
route where no clearing and grubbing was required; (3) that a currently retained
sum of  $46,585,  to which  Tengasco  makes no claim,  remain in escrow  pending
outcome of ongoing litigation between King and King's boring subcontractor,  (4)
that King is not  entitled  to  receive  any of the  $94,000  billed by King for
certain  alleged  extra work in  trenching,  because a change order seeking this
payment was not  submitted  until months after all work was  completed,  and (5)
that Tengasco is entitled to recover its attorney's  fees.  Tengasco  expects in
the  aggregate  of the  rulings on these  issues,  a  favorable  outcome of this
arbitration that either results in positive  recovery by the Company or a result
that is not materially adverse.

<PAGE>


                           4.15 EXISTING INDEBTEDNESS

ARVEST BANK LOANS
     (Information previously provided)
          PRINCIPAL AND ACCRUED INTEREST TO NOVEMBER 9, 2001, $1,427,309.25

"DIRECTORS" LOANS (IN AGGREGATE)
     Principal: $3,850,000
     Maker: Tengasco Pipeline Corporation
     Payee: Various (Nishiwaki; Gray; Ratliff; Smithers)
     Date: Various (August, 2000)
     Interest: 10.25%
     Maturity Date: 5 years from date of respective notes (August, 2005)
          AGGREGATE  AMOUNT  DUE AS OF  NOVEMBER  9,  2001 ON  NISHIWAKI,  GRAY,
          RATLIFF,  AND  SMITHERS  NOTES:  $3,895,492.83  BEING  PRINCIPAL  PLUS
          INTEREST THROUGH NOVEMBER 9, 2001

SPOONBILL, INC. NOTE
     Principal: $1,000,000
     Maker: Tengasco, Inc.
     Payee: Spoonbill, Inc.
     Date: April 27, 2001
     Interest: 15% per annum
     Maturity Date: April 26, 2002
          AMOUNT DUE AS OF NOVEMBER 9, 2001: $1,080,833.34
          ($1,000,000  PRINCIPAL PLUS INTEREST OF $80,833.34 THROUGH NOVEMBER 9,
          2001)

DRILL RIG NOTE
     Principal: $995,000
     Maker: Tengasco, Inc.
     Payee: M. E. Ratliff
     Date: Nov. 1, 2000
     Interest: 8% per annum
     Maturity Date: Nov. 1, 2005
          AMOUNT DUE AS OF NOVEMBER 9, 2001: $1,003,844.44
          ($995,000  PRINCIPAL  PLUS INTEREST OF $8,844.44  THROUGH  NOVEMBER 9,
          2001)

GRAY LOAN AGREEMENT
     Principal: $500,000
     Maker: Tengasco, Inc.
     Payee: Edward W. T. Gray III
     Date: Dec. 15, 1998
     Interest: 8% per annum
     Maturity Date: December 31, 2001
          CASH AMOUNT DUE AS OF NOVEMBER 9, 2001: $304,444.44
          ($500,000 PRINCIPAL PLUS UNPAID INTEREST OF $4,444.44 THROUGH NOVEMBER
          9, 2001 PAYABLE AS FOLLOWS: $304,444 PAYABLE IN CASH, $200,000 PAID IN
          STOCK OF  TENGASCO,  CONVERTED AT THE  CONVERSION  RATE SET OUT IN THE
          NOTE INTO 42,373 SHARES).

LUTHERAN BROTHERS NOTE

     That certain principal and accumulated  interest under Loan Agreement dated
October 30, 1998 between Tengasco,  Inc. as Borrower and United Missouri Bank of
St. Louis, N.A. as trustee for Lenders,  with principal and accumulated interest
of $724,800.00.

<PAGE>


                                 SCHEDULE 4.16

                              MATERIAL COMMITMENTS

                                      NONE


                                       1
<PAGE>


SCHEDULE 4.22 INSURANCE CERTIFICATE



<PAGE>


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    DATE (MM/DD/YY)
ACORD(TM)                           CERTIFICATE OF LIABILITY INSURANCE                                                  10-29-01
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>
PRODUCER                                                      THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS
                                                              NO RIGHTS  UPON THE  CERTIFICATE  HOLDER.  THIS  CERTIFICATE  DOES NOT
VOLUNTEER INSURANCE COMPANY, INC.                             AMEND,  EXTEND OR ALTER THE COVERAGE AFFORDED BY THE  POLICIES  BELOW.
133 MONTVUE ROAD                                              ----------------------------------------------------------------------
KNOXVILLE, TN 37919                                                                INSURERS AFFORDING COVERAGE
------------------------------------------------------------------------------------------------------------------------------------
TENGASCO, INC., TENNESSEE LAND                                INSURER A: AMERICAN EMPIRE SURPLUS LINES INS.
AND MINERAL, (INC.) AND TENGASCO                              INSURER B: NATIONAL INDEMITY COMPANY
PIPELINE CORPORATION                                          INSURER C: LIBERTY MUTUAL
603 MAIN AVENUE, SUITE 500                                    INSURER D: TRAVELERS INSURANCE COMPANIES
KNOXVILLE, TN 37902                                           INSURER E:
------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
------------------------------------------------------------------------------------------------------------------------------------
THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED.  NOTWITHSTANDING
ANY  REQUIREMENT,  TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS  CERTIFICATE  MAY BE ISSUED OR MAY
PERTAIN,  THE INSURANCE  AFFORDED BY THE POLICIES  DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,  EXCLUSIONS AND CONDITIONS OF  SUCH
POLICIES, AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                    POLICY        POLICY
                                                                  EFFECTIVE     EXPIRATION
INSERT                                                               DATE          DATE
 LTR     TYPE OF INSURANCE                        POLICY NUMBER    MM/DD/YY      MM/DD/YY           [ILLEGIBLE]
-----------------------------------------------------------------------------------------------------------------------------------
<S>     <C>                                    <C>                 <C>           <C>         <C>                        <C>
        |GENERAL LIABILITY                                                                   EACH OCCURRENCE            $ 1,000,000
        |X| COMMERCIAL GENERAL LIABILITY                                                     FIRE DAMAGE (ANY ONE TIME) $   100,000
A       | | | CLAIMS MADE |X| OCCUR            lEP03124            02-01-01      02-02-02    MED EXP (ANY ONE PERSON)   $     5,000
        | | _________________________________                                                PERSONAL & ADV INJURY      $ 1,000,000
        | | _________________________________                                                GENERAL AGGREGATE          $ 1,000,000
        | GENERAL AGGREGATE LIMIT APPLIES PER                                                PRODUCTS-[ILLEGIBLE]       $ 1,000,000
        | |POLICY | | PROJECT | |         LOC
------------------------------------------------------------------------------------------------------------------------------------
        |AUTOMOBILE LIABILITY                                                                COMBINED SINGLE LIMIT      $ 1,000,000
        |X|ANY AUTO                                                                          (Ea accident)
B       |X|ALL OWNED AUTOS                     74APN173866 - TN                              BODILY INJURY              $
        |X|SCHEDULED AUTOS                     70AP367651  - KS    02-01-01      02-01-02    (Per person)
        |X|HIRED AUTOS                                                                       BODILY INJURY              $
        |X|NON-OWNED AUTOS                                                                   (per accident)
        | |____________________________                                                      PROPERTY DAMAGE            $
                                                                                             (Per accident
------------------------------------------------------------------------------------------------------------------------------------
        |GARAGE LIABILITY                                                                    AUTO ONLY - EA ACCIDENT    $
        | |ANY AUTO                                                                          OTHER THAN EA. ACC         $
        | |                                                                                  AUTO ONLY:                 $
------------------------------------------------------------------------------------------------------------------------------------
        |EXCESS LIABILITY                                                                    EACH OCCURRENCE            $14,000,000
        | |OCCUR          | |CLAIMS MADE                                                     AGGREGATE                  $
A       |                                      1EX03125            02-01-01      02-01-02                               $
        | |DEDUCTIBLE                                                                                                   $
        | |DETENTION
------------------------------------------------------------------------------------------------------------------------------------
D       |WORKERS COMPENSATION AND          KS- 6JOB-69BX789-4-00                                WC STATU-      ILLEG-
        |EMPLOYERS' LIABILITY                                                                   TORY LIMITS     IBLE
        |                                                                                    G.L. EACH ACCIDENT         $ 1,000,000
C       |                                  TN- WC2-355-32S568-010  12-13-00      12-13-01    G.L. [illeg]-EA EMPLOYEE   $ 1,000,000
        |                                                                                    G.L. [illeg]-POLICY LIMIT  $ 1,000,000
------------------------------------------------------------------------------------------------------------------------------------
        |OTHER
        |
        |
------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONAL LOCATION VEHICLE/EXCLUSIONS ADDED BY ENDORSEMENT SPECIAL PROVISIONS
"INSURANCE CARRIER WAIVES RIGHT OF SUBROGATION"


------------------------------------------------------------------------------------------------------------------------------------
                                               ADDITIONAL INSURED
CERTIFICATE HOLDER                          X  INSURER LETTER: A        CANCELLATION
------------------------------------------------------------------------------------------------------------------------------------
                                                                        BANK ONE, NA SHOULD ANY OF THE ABOVE  DESCRIBED  POLICIES BE
                                                                        CANCELLED  BEFORE THE EXPIRATION  DATE THEREOF,  THE ISSUING
                                                                        INSURER WILL ENDEAVOR TO MAX _10_ DAYS WRITTEN NOTICE TO THE
                                                                        CERTIFICATE  HOLDER NAMED TO THE LEFT,  BUT FAILURE TO __ __
                                                                        _______  IMPOSE NO  OBLIGATION OR LIABILITY OF ANY KIND UPON
                                                                        THE    INSURER,     ITS    AGENTS    OR     REPRESENTATIVES.
                                                                        ------------------------------------------------------------
                                                                        AUTHORIZED REPRESENTATIVE [ILLEGIBLE]
------------------------------------------------------------------------------------------------------------------------------------
ACORD 26-8 (7/97)                                                                                         (C) ACORD CORPORATION 19??
</TABLE>

<PAGE>


                         SCHEDULE 4.24 - PIPELINE ASSETS


All of Grantor's  right,  title,  and  interest  in, to,  under  pursuant to the
following  rights-of-way,  leases  (other  than the right to produce  oil or gas
under any lease  granting  pipeline  installation  and use  rights to  Grantor),
and/or easements located in Hancock County, Hawkins County, and Sullivan County,
Tennessee:

[PHASE I]: That certain steel  pipeline main, 6 inches and 8 inches in diameter,
as it has  been  installed,  together  with  all  associated  permits,  pipeline
rights-of-way,  and pipeline  installation  rights under oil and gas leases (but
excluding  any rights to produce oil and gas leases  under any oil and gas lease
granting  such  pipeline  installation  rights),  from a point at the Big  Creek
Missionary Baptist Church at the intersection of Upper Caney Valley Road and Big
Creek Road in Hancock County,  Tennessee,  extending generally eastward north of
the  Clinch  River,  boring  under the  Clinch  River and  proceeding  generally
southward along an existing Tennessee Valley Authority  powerline easement along
and within  rights-of-way  thereon,  which are incorporated by reference for all
purposes  but without  limiting the  generality  of the  foregoing  description,
proceeding further into Hawkins County, Tennessee, to a point of intersection of
the existing installed  pipeline with the distribution  system of Hawkins County
Gas  Utility  District,   a  total  distance  described  in  this  paragraph  of
approximately 26.0 miles; together with

[PHASE II]: That certain steel  pipeline main 8 inches and 12 inches in diameter
as  it  has  been  installed,   together  with  a  4-inch  supply  line  already
constructed,  with all associated contracts,  permits,  agreements, and pipeline
rights-of-way,  extending from a point of intersection of the existing installed
Phase I pipeline described above with the distribution  system of Hawkins County
Gas Utility  District and proceeding  from that point  generally  eastward along
rights-of- way along Highway 11-W,  and proceeding  further along and within the
right-of-way  of Highway 11-W in accordance with the permit granted by Tennessee
Department of Transportation  to Tengasco  Pipeline  Corporation dated April 11,
2000,  and proceeding  generally  eastwards to a point located on the grounds of
Holston  Army  Ammunition  Plant in  accordance  with the Tenant  Use  Agreement
between Royal Ordinance North America,  Inc. (now BAE Systems Ordnance  Systems,
Inc.) and Tengasco Pipeline  Corporation dated June 16, 2000, which agreement is
incorporated by reference for all purposes, proceeding to a point on the grounds
of the Holston Army Ammunition Plant known as Mead Station, proceeding from that
point  further both as a 4- inch supply line to Holston Area A and ending at the
Area A boilers and as a 12-inch main line generally  southward,  off the grounds
of Holston  Army  Ammunition  Plant and across  rights-of-way  to and  including
property  owned by Eastman  Chemical  Company,  and  proceeding  to the point of
interconnection  with the existing  natural gas system owned by Eastman Chemical
Company in Kingsport,  Sullivan County, Tennessee, a total distance described in
this paragraph of approximately 30.4 miles,  together with compressors,  valves,
stations  and metering  equipment  installed  to effect  deliveries  through the
pipeline.

<PAGE>


                    SCHEDULE 4.25 HOLDINGS OF TENGASCO STOCK
                                 TENGASCO, INC.

                                    DIRECTORS
                                    ---------

Joseph Armstrong                                                          52,500

Benton Becker                                                             94,500

Edward W.T. Gray, III                                                    133,718

Robert D. Hatcher, Jr.                                                    52,500

Sanford McCormick                                                         42,000

Shigemi Morita                                                           246,898

Charles Stivers                                                              -0-

M.E. Ratliff                                                           2,866,862


                                    OFFICERS
                                    --------

M.E. Ratliff               CEO                         2,866,862 (Same As Above)

Harold G. Morris, Jr.      President                   55,500

Mark A. Ruth               Chief Financial Officer     38,587

Linda Parton               Secretary                    2,100

Sheila Sloan               Treasurer                   12,600


<PAGE>

                        COMPLIANCE CERTIFICATE


          I, the Chief Executive  Officer of TENGASCO,  INC. on behalf of itself
and  TENNESSEE  LAND & MINERAL  CORPORATION  and TENGASCO  PIPELINE  CORPORATION
(collectively  the "Company"),  pursuant to Section 5.05 of the Credit Agreement
dated as of November 8, 2001, by and among BANK ONE, NA ("Bank") and the Company
(the  "Agreement")  do  hereby  certify,  as of  the  date  hereof,  that  to my
knowledge:

     1.   No Event of Default (as defined in the  Agreement) has occurred and is
          continuing,  and no  Unmatured  Event of  Default  (as  defined in the
          Agreement) has occurred and is continuing;

     2.   No material  adverse  change has occurred in the business,  prospects,
          financial condition, or the results of operations of the Company since
          the date of the  previous  Financial  Statements  (as  defined  in the
          Agreement) provided to Bank;

     3.   Each of the representations and warranties of the Company contained in
          Article IV of the Agreement is true and correct in all respects;

Executed this 8th day of November, 2001.

                                            TENGASCO, INC.
Attest:

/s/ Linda Parton                            By: /s/ M. E. Ratliff
----------------                            ---------------------
LINDA PARTON                                    M. E. Ratliff
Secretary                                       Chief Executive Officer


</TEXT>
</DOCUMENT>
