SUBORDINATION AND NOMINEE AGREEMENT


     This Subordination and Nominee Agreement (this "Nominee Agreement") is made
as of the 22nd day of July,  2005  ("Effective  Date"),  by and among William M.
Beard and Lu Beard,  as  Trustees  of The  William  M.  Beard and Lu Beard  1988
Charitable Unitrust ("Unitrust"),  Boatright Family, L.L.C.  ("Boatright"),  and
McElmo Dome Nominee, LLC, a limited liability company ("Nominee").

     Whereas,  The Beard Company (the  "Company")  has executed and delivered to
Unitrust  that  certain  Promissory  Note dated March 26,  2004 in the  original
principal  amount of $2,785,000 (the "Prior Unitrust  Note"),  upon which, as of
the  Effective  Date,  the unpaid  principal  balance is  $2,782,900.59  and the
accrued unpaid interest is $59,095.66; and

     Whereas,  Unitrust has previously  executed and delivered to Boatright that
certain  Promissory Note (the "Unitrust  Boatright Note") dated May 21, 2004, in
the original principal amount of $500,000, upon which, as of the Effective Date,
the unpaid principal balance is $388,817.92  ("Assumed Balance") and all accrued
interest has been paid in full; and

     Whereas, the Company has previously executed and delivered to Unitrust that
certain 10%  Participating  Note, dated May 21, 2004, in the original  principal
amount of  $500,000.00  (the "Company  Unitrust  Note"),  upon which,  as of the
Effective  Date, the unpaid  principal  balance is  $384,101.80  and all accrued
interest has been paid in full; and

     Whereas,  Unitrust used the proceeds of the Unitrust Boatright Note to make
the  loan  to  the  Company  evidenced  by the  Company  Unitrust  Note,  and in
consideration  of such loan and to secure payment of the loans  evidenced by the
Prior Unitrust Note and the Unitrust Boatright Note (collectively,  the "Notes")
the Company has  executed  and  delivered  to the public  trustees of  Montezuma
County and Dolores County,  Colorado,  that certain Deed of Trust, Assignment of
Production,  Security Agreement,  and Financing  Statement,  dated as of May 21,
2004,  (the "2004 Deed of  Trust"),  covering  certain  oil,  gas,  and  mineral
interests (collectively, the "Collateral"), for the benefit of the Nominee; and

     Whereas,  Unitrust,  Boatright,  and certain other parties have  previously
entered into a Subordination and Nominee Agreement dated May 21, 2004 (the "2004
Nominee  Agreement")  under  which  (i) the  Nominee  agreed to act as agent and
nominee on behalf of Unitrust,  Boatright, and such other parties under the 2004
Deed of Trust, and (ii) the parties have agreed to certain  priorities among the
parties with respect to proceeds of the Collateral; and

     Whereas, the Company has assumed and promised to pay the Assumed Balance of
the Unitrust Boatright Note; and

     Whereas,  in  consideration  of the  renewal and  extension  of the Assumed
Balance and payment in cash of the amount of $1,182.08, the Company has executed
and delivered to Boatright the Company's 12% Convertible  Subordinated  Note due
August 31, 2009, in the principal amount of $390,000.00 (the "Company  Boatright
Note"); and

     Whereas,  under the terms of the 2004 Nominee  Agreement,  Boatright  holds
first  priority with respect to proceeds of the  Collateral to the extent of the
indebtedness  evidenced  by the  Unitrust  Boatright  Note,  and the  Unitrust's
priority  with  respect to proceeds of the  Collateral  is  subordinated  to the
priority of Boatright; and

     Whereas, to secure payment of the loans evidenced by the Prior Company Note
and the Company  Boatright  Note,  the Company has  executed and  delivered  two
certain deeds of trust (collectively, the "2005 Deed of Trust"), each dated July
22, 2005 and titled Deed of Trust, Assignment of Production,  Security Agreement
and  Financing  Statement,  one  such  deed of trust to the  public  trustee  of
Montezuma  County,  Colorado and one such deed of trust to the public trustee of
Dolores County, Colorado, covering the Collateral; and

     Whereas,  the parties desire to provide for the orderly  enforcement of the
rights of Unitrust and Boatright  (collectively,  the "Noteholders") in the lien
(the "Lien")  created in the Collateral  under the 2005 Deed of Trust and to set
forth  the  priority  as  among  the   Noteholders  of  all  proceeds  from  the
foreclosure,  deed-in-lieu of  foreclosure,  or other sale or disposition of the
Collateral or the rights of the Nominee under the 2005 Deed of Trust,  or of any
other recovery resulting from or under the 2005 Deed of Trust ("Proceeds"); and

     Whereas, Unitrust,  Boatright, and certain other parties previously entered
into a  Subordination  and Nominee  Agreement dated February 21, 2003 (the "2003
Nominee  Agreement")  under which Nominee  agreed to act as agent and nominee on
behalf of Unitrust, Boatright, and such other parties under that certain Deed of
Trust,  Assignment of Production,  Security Agreement,  and Financing Statement,
dated as of  February  21,  2003 (the "2003  Deed of  Trust"),  executed  by the
Company for the benefit of Nominee, covering the Collateral and securing payment
of the certain  indebtedness  of the Company now evidenced by the Prior Unitrust
Note and certain other indebtedness described in the 2003 Nominee Agreement.

     Now,  therefore,  in  consideration of the foregoing  premises,  the mutual
covenants  and  agreements  contained  in this  Agreement,  and  other  good and
valuable   considerations,   the  receipt  and  adequacy  of  which  are  hereby
acknowledged,  Unitrust and Boatright  hereby  designate and appoint  Nominee as
their  agent to act on behalf  of all  Noteholders  in  holding  the  beneficial
interest  granted  under the 2005 Deed of Trust,  and in  enforcing  any and all
rights of the beneficiary  under the 2005 Deed of Trust as provided herein,  and
Nominee hereby accepts such  designation and appointment and agrees to hold such
interest and act with respect to such interest in accordance  with the terms and
conditions of this Agreement.

     For the considerations stated above, the Unitrust,  Boatright,  and Nominee
hereby further agree as follows:

     1.  Nominee.  Nominee  shall act as the  Noteholders'  agent and shall hold
title  to the  Lien  and  the  Collateral  as  nominee  for the  benefit  of all
Noteholders.

     2. Enforcement of Deed of Trust. Nominee shall not transfer,  sell, pledge,
hypothecate,  encumber,  or otherwise  exercise  any incident of ownership  with
respect to the Lien or the Collateral held by it as nominee, except as follows:

          a. At all times prior to payment in full of the Assumed Balance of the
     Company Boatright Note, plus interest accrued thereon, and after payment in
     full of the Prior  Unitrust  Note,  Nominee  shall execute and deliver such
     instruments and shall take such actions or refrain from taking such actions
     as  Boatright  may require  for  purposes  of  enforcing  the rights of the
     Noteholders under the Deeds of Trust.

          b. At all times  following  payment in full of the Assumed  Balance of
     the Company  Boatright Note, plus interest  accrued  thereon,  but prior to
     payment in full of the Prior  Unitrust  Note,  Nominee  shall  execute  and
     deliver such instruments and shall take such actions or refrain from taking
     such actions as the  Unitrust  may require for  purposes of  enforcing  the
     rights of the Noteholders under the Deeds of Trust.

     3.  Disposition  of  Collateral.  All  Proceeds  shall  be  applied  in the
following order:

          a. First, to the expenses  incurred in enforcement of the 2005 Deed of
     Trust, the obligations secured thereby, and collection of such obligations;

          b. Second,  to  Boatright  to the extent  necessary to pay the Company
     Boatright  Note,  in an amount  not to exceed  the  Assumed  Balance,  plus
     accrued interest thereon;

          c. Third,  to the  Unitrust to the extent  necessary  to pay the Prior
     Unitrust Note, principal and interest;

          d.  Fourth,  to  Boatright  to the extent  necessary  to  satisfy  the
     remaining  balance of principal  and interest  under the Company  Boatright
     Note; and

          e. Fifth, as required by law and by the 2005 Deed of Trust.

     4.  Notice  to  Noteholders.  The  Nominee  may,  at any time,  notify  any
Noteholder of the status of the obligations secured by the Deed of Trust and the
enforcement thereof, including any notice or instruction received by the Nominee
by any Noteholder.

     5. Binding  Effect.  This  Agreement  shall be binding upon the  respective
successors and assigns of the parties hereto.

     6.  Termination.  This Agreement may not be terminated  without the written
consent of the  Noteholders;  provided,  that  following  payment in full of the
Company  Boatright Note, no such consent shall be required of Boatright.  In the
event of  termination,  Nominee  agrees to take such  action  and  execute  such
documents as the  Noteholders  shall request to cause the Lien or the Collateral
to be conveyed to the Noteholders, or as otherwise directed by the Noteholders.

     7. Governing  Law. The  provisions of this Agreement  shall be construed in
accordance with the laws of the State of Oklahoma.

     8.  Counterparts.   This  Agreement  may  be  executed  in  any  number  of
counterparts,  each of  which  shall be  deemed  as  original,  but all of which
together shall constitute one and the same agreement.

     9.  Subordination  of Prior Deeds of Trust. It is the intent of the parties
that the 2003 Deed of Trust, the liens created thereunder,  and all of Nominee's
rights thereunder, be renewed and extended and incorporated within the 2004 Deed
of Trust, and that the 2004 Deed of Trust, the liens created thereunder, and all
of Nominee's rights thereunder,  be renewed and extended and incorporated within
the 2005 Deed of Trust.  To the extent,  if any,  that the 2003 Deed of Trust or
the 2004 Deed of Trust remains  separately  enforceable,  the 2003 Deed of Trust
and the 2004 Deed of Trust are,  and shall be, at all times  prior to payment in
full of the Unitrust  Boatright Note,  subordinate and inferior to the 2005 Deed
of Trust.

"UNITRUST"                           THE WILLIAM M. BEARD AND LU BEARD 1988
                                       CHARITABLE UNITRUST

                                     By  /s/ William M. Beard
                                         William Beard, Trustee

                                     By  /s/ Lu Beard
                                         Lu Beard, Trustee


"NOMINEE"                            MCELMO  DOME  NOMINEE,  LLC,  an  Oklahoma
                                       limited liability company

                                     By  /s/ William M. Beard
                                         William Beard, Member

                                     By: BOATRIGHT FAMILY L.L.C., Member

                                         By  /s/ Peter Boatright
                                             Peter Boatright, Manager

"BOATRIGHT"                          BOATRIGHT FAMILY L.L.C., an Oklahoma
                                       limited liability company

                                     By  /s/ Peter Boatright
                                         Peter Boatright, Manager



         ACKNOWLEDGED by The Beard Company this 22nd day of July, 2005.

                                     /s/ Herb Mee, Jr.
                                     Herb Mee, Jr., President

STATE OF OKLAHOMA      )
                       )  SS.
COUNTY OF OKLAHOMA     )

     The foregoing  instrument was acknowledged before me this 21st day of July,
2005,  by  William  Beard,  Trustee  of The  William  M. Beard and Lu Beard 1988
Charitable Unitrust.

                                  /s/ Linda Shrum
                                  Notary Public
My Commission Expires:            Commission No. 02017703
10/30/2006
             (SEAL)


STATE OF OKLAHOMA       )
                        )  SS.
COUNTY OF OKLAHOMA      )

     The foregoing  instrument was acknowledged before me this 21st day of July,
2005, by Lu Beard,  Trustee of The William M. Beard and Lu Beard 1988 Charitable
Unitrust.

                                  /s/ Linda Shrum
                                  Notary Public
My Commission Expires:            Commission No. 02017703
10/30/2006
             (SEAL)


STATE OF OKLAHOMA      )
                       )  SS.
COUNTY OF OKLAHOMA     )

     The foregoing  instrument was acknowledged before me this 21st day of July,
2005, by William Beard,  Member of McElmo Dome Nominee LLC, an Oklahoma  limited
liability company, on behalf of the limited liability company.

                                  /s/ Linda Shrum
                                  Notary Public
My Commission Expires:            Commission No. 02017703
10/30/2006
             (SEAL)


STATE OF OKLAHOMA      )
                       )  SS.
COUNTY OF OKLAHOMA     )

     The foregoing  instrument was acknowledged before me this 22nd day of July,
2005, by Peter Boatright,  as Manager of BOATRIGHT  FAMILY L.L.C.,  as member of
McElmo Dome Nominee LLC, an Oklahoma limited liability company, on behalf of the
limited liability company.

                                  /s/ Linda Shrum
                                  Notary Public
My Commission Expires:            Commission No. 02017703
10/30/2006
             (SEAL)


STATE OF OKLAHOMA      )
                       )  SS.
COUNTY OF OKLAHOMA     )

     The foregoing  instrument was acknowledged before me this 22nd day of July,
2005,  by Peter  Boatright,  Manager of  Boatright  Family  L.L.C.,  an Oklahoma
limited liability company, on behalf of the limited liability company.

                                  /s/ Linda Shrum
                                  Notary Public
My Commission Expires:            Commission No. 02017703
10/30/2006
             (SEAL)


STATE OF OKLAHOMA      )
                       )  SS.
COUNTY OF OKLAHOMA     )

     The foregoing  instrument was acknowledged before me this 22nd day of July,
2005, by Herb Mee, Jr., President of The Beard Company, an Oklahoma corporation,
on behalf of the corporation.

                                  /s/ Linda Shrum
                                  Notary Public
My Commission Expires:            Commission No. 02017703
10/30/2006
             (SEAL)