THESE  SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY FEDERAL OR STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED,  ASSIGNED OR OTHERWISE DISPOSED OF ABSENT
REGISTRATION  UNDER  THE  SECURITIES  ACT  OF  1933  AND  ANY  APPLICABLE  STATE
SECURITIES  LAWS UNLESS AND UNTIL THE HOLDER  HEREOF  PROVIDES  (i)  INFORMATION
REASONABLY  NECESSARY TO CONFIRM THAT SUCH  REGISTRATION IS NOT REQUIRED OR (ii)
AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.



                    CONVERTIBLE SUBORDINATED PROMISSORY NOTE


$_________________                                      _________________, 2005


FOR VALUE RECEIVED, the undersigned,  THE BEARD COMPANY, an Oklahoma corporation
(the "Company"),  promises to pay to the order of __________________ (the payee,
its successors and permitted  assigns are hereinafter  called the "Holder"),  at
Suite 320, 5600 North May Avenue,  Oklahoma  City,  Oklahoma  73112,  or at such
other place as may be designated in writing by the Holder,  the principal sum of
_____________ DOLLARS ($______________), together with interest thereon pursuant
to the terms stated below:

RECITAL:

     A. This Note is a statement of the rights of the Holder and the  conditions
to which the Note is subject and the Holder, by acceptance hereof, agrees as set
forth below.

     B.  This  Note is part of a series of Notes  issued  in  connection  with a
private offering (the "Private Placement Offering") made by the Company pursuant
to a Private Placement  Memorandum dated June 29, 2005, as amended by Supplement
#1 dated July 15, 2005.

                              1. Terms of the Note

     1.1 Payment of Principal and Interest.

     (a) Prior to Default  the unpaid  principal  balance of this Note will bear
interest at the per annum rate equal to twelve percent  (12%).  Interest will be
paid semi-annually on February 28th and August 31st of each year,  commencing on
February  28,  2006,  until  this  Note is paid in full.  All  interest  will be
computed on the basis of a 360-day year of 12 months of 30 days.

     (b) At the time of the  issuance of this Note,  the Holder may elect in the
subscription  agreement entered into between Holder and the Company  subscribing
to the Note (the "Subscription  Agreement") to have the interest paid either (i)
in cash,  or (ii) in shares  of the  Company's  Common  Stock  (defined  below).
Holder's election in the Subscription  Agreement  regarding the form of interest
payment is irrevocable once made; provided,  however,  that the Company reserves
the  right to pay the  interest  on the  Notes in cash,  notwithstanding  a Note
holder's  election to receive their interest in Common Stock, if, in the opinion
of the Company the  issuance of such Common Stock could result in a violation of
federal or state securities laws or any other applicable laws.

     If Holder elects to receive interest  payments in the form of Common Stock,
the number of shares Holder will receive,  as of each interest payment date will
be  determined  by dividing  the  applicable  interest  payment by the  weighted
average  closing price of the Company's  Common Stock during the 20 trading days
preceding the interest  payment date multiplied by 85%. No fractional  shares of
Common  Stock  shall be issued  as  payment  of  interest  on the  Note.  If any
fractional share of Common Stock would be issuable upon an interest payment, the
Company  shall make an  adjustment  thereof in cash at the current  market value
thereof. For these purposes, the current market value of a share of Common Stock
shall be the closing price on the first business day  immediately  preceding the
day on which the interest payment was due.

     (c) The entire unpaid  principal  balance of this Note plus all accrued and
unpaid interest thereon will be due and payable on the Maturity Date.

     1.2 Maturity Date. As used in this Note,  "Maturity Date" means the earlier
of: (a) the date the  Holder  notifies  the  Company  that the unpaid  principal
balance  of this  Note is due  based on the  occurrence  of an Event of  Default
(defined below); or (b) August 31, 2009.

     1.3 Allocation of Payments. All payments on this Note will be applied first
to the payment of accrued  interest and the balance will be applied in reduction
of the principal balance hereof.

     1.4  Payments.  If any payment under this Note becomes due and payable on a
day other than a business day, the maturity thereof will be extended to the next
succeeding business day and such extension of time will in such case be included
in the computation of payments of interest.

     1.5  Expenses.  The  Company  agrees that if, and as often as, this Note is
placed in the hands of an attorney for collection or to defend or enforce any of
the Holder's rights  hereunder or under any instrument  securing payment of this
Note, the Company will pay the Holder's  reasonable  attorneys'  fees, all court
costs and all other expenses incurred by the Holder in connection therewith.

     1.6  Default  Interest.  Any sum not paid  when  due,  by  acceleration  or
otherwise,  will bear  interest  at the per annum rate  equal to twelve  percent
(14%) (the "Default Interest") and all the Default Interest shall be paid at the
time of and as a condition precedent to curing any Event of Default hereunder.

     1.7 Events of Default.  Events of Default include:  (a) default for 30 days
in payment when due of the  principal  on the Notes;  (b) default for 30 days in
the payment when due of interest on the Notes; or (c) default in the performance
of Section 2.9 of this Agreement.

                           2. Conversion of the Note

     2.1  Conversion  Agent.  The  Company  shall  initially  serve  as its  own
conversion agent. The Company may appoint another Conversion Agent at any time.

     2.2  Conversion  Privilege.  At any time  following  the  date of  original
issuance  of this Note and prior to the close of business  on the  business  day
immediately  preceding August 31, 2009, the Holder of this Note may convert such
Note or any portion  thereof  into  shares of the  Company's  common  stock (the
"Common Stock") (the shares of Common Stock issuable upon such conversion  along
with the shares of Common Stock paid as interest on the Note pursuant to Section
1.1(b)  of this Note are  referred  to herein  collectively  as the  "Conversion
Shares"), at the Conversion Price then in effect. The number of shares of Common
Stock issuable upon  conversion of this Note shall be determined by dividing the
principal  amount of the Note or portion  thereof  surrendered for conversion by
the Conversion  Price in effect on the conversion  date. The initial  conversion
price of the Note  shall be $_____  per share (the  "Conversion  Price")  and is
subject to adjustment as provided in Section 2.7.

     Upon  conversion  of only a portion of the  principal  balance of the Notes
surrendered for conversion, the Company shall issue and deliver upon the written
order of the Holder, at the expense of the Company, a new Note for any remaining
unpaid principal balance so surrendered as well as a certificate or certificates
for the number of shares of Common  Stock to which such Holder is  entitled,  as
provided  below.  The Holder is not entitled to any rights of a holder of Common
Stock until such Holder has converted this Note into Common Stock.

     2.3  Conversion  Procedure.  To  convert  this Note,  the  Holder  must (i)
complete and manually sign the  Conversion  Notice,  a form of which is attached
hereto as Exhibit A and deliver it to the Company (ii) surrender the Note to the
Company,  (iii) furnish  appropriate  endorsements and transfer documents to the
Company and (iv) pay any transfer or other tax, if  required.  The date on which
the Holder  satisfies all of the foregoing  requirements is the conversion date.
As soon as practicable  after the conversion  date, the Company shall deliver to
the Holder  through its  transfer  agent a  certificate  for the number of whole
shares of Common Stock issuable upon the conversion.

     No fractional shares of Common shall be issued upon conversion of the Note.
If more than one Note shall be  surrendered  for  conversion  at one time by the
same holder,  the number of full shares which shall be issuable upon  conversion
shall be computed on the basis of the  aggregate  principal  amount of the Notes
(or specified  portions thereof to the extent permitted  hereby) so surrendered.
If any fractional share of Common Stock would be issuable upon the conversion of
any Note or Notes,  the Company shall make an adjustment  thereof in cash at the
current market value thereof. For these purposes,  the current market value of a
share of Common  Stock  shall be the  closing  price on the first  business  day
immediately preceding the day on which the Note or Notes are deemed to have been
converted.

     The person in whose name the  certificate is registered  shall be deemed to
be a stockholder of record on the conversion date;  provided,  however,  that no
surrender of this Note on any date when the stock  transfer books of the Company
shall be closed shall be effective to constitute the person or persons  entitled
to receive the shares of Common Stock upon such  conversion as the record holder
or holders of such shares of Common Stock on such date, but such surrender shall
be effective to constitute the person or persons entitled to receive such shares
of Common Stock as the record holder or holders  thereof for all purposes at the
close of business on the next  succeeding day on which such stock transfer books
are open;  provided,  further,  that such conversion  shall be at the Conversion
Price in  effect on the date that this  Note  shall  have been  surrendered  for
conversion,  as if the stock  transfer books of the Company had not been closed.
Upon conversion of this Note, Holder shall no longer be a Holder of this Note.

     No payment or adjustment  will be made for accrued  interest on a converted
Note or for  dividends  or  distributions  on shares of Common Stock issued upon
conversion  of a Note,  but if any Holder  surrenders  this Note for  conversion
between the record date for the payment of an  installment  of interest  and the
next interest payment date, then,  notwithstanding such conversion, the interest
payable on such interest payment date shall be paid to the Holder on such record
date.

     If the Holder  converts more than one Note at the same time,  the number of
shares  of  Common  Stock  issuable  upon the  conversion  shall be based on the
aggregate principal amount of Notes converted.

     2.4 Forced Conversion. At any time after February 28, 2007, if the weighted
average closing price of the Company's common stock has been more than two times
the Conversion  Price for sixty (60)  consecutive  trading days, the Company may
give the Note holders  written  notice that they must convert their Notes within
thirty (30) days after the date of such notice or that the Notes will  terminate
and become void as of 5:00 p.m.,  New York time on the  thirty-first  (31st) day
(the "Forced Conversion Date") after the date of such notice.

     Upon such Forced Conversion,  the person or persons entitled to receive the
shares of Common Stock  issuable  upon such  conversion  will be treated for all
purposes  as the record  holder or holders  of such  Common  Stock on the Forced
Conversion  Date  whether or not such holder or holders  shall have  surrendered
their Notes to the  Company.  Upon the Forced  Conversion  Date,  the  principal
balance of the Notes  shall be deemed  paid and all  interest on the Notes shall
cease to accrue.  As soon as practicable  after the surrender in accordance with
the  procedures  set forth in  Section  2.3,  the  Company  shall then issue and
deliver,  at the  office  of  the  Company  to  such  holder  a  certificate  or
certificates for the number of shares of Common Stock to which such holder shall
be entitled.

     2.5 Taxes on  Conversion.  If the Holder  converts a Note, he shall pay any
documentary,  stamp or similar  issue or transfer tax due on the issue of shares
of Common  Stock upon such  conversion.  The  Company  may refuse to deliver the
certificates representing the Common Stock being issued in a name other than the
Holder's name until the Company  receives a sum  sufficient to pay any tax which
will be due  because  the  shares  are to be  issued  in a name  other  than the
Holder's name. Nothing herein shall preclude any tax withholding required by law
or regulations.

     2.6  Company  To  Provide  Stock.  The  Company  shall  reserve  out of its
authorized  but unissued  Common  Stock a sufficient  number of shares of Common
Stock to permit the  conversion  of all  outstanding  Notes for shares of Common
Stock. The shares of Common Stock or other securities  issued upon conversion of
this Notes shall bear the following legend:

         THESE  SECURITIES HAVE NOT BEEN  REGISTERED  UNDER ANY FEDERAL OR
         STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED,  ASSIGNED
         OR OTHERWISE DISPOSED OF ABSENT REGISTRATION UNDER THE SECURITIES
         ACT OF 1933 AND ANY APPLICABLE  STATE  SECURITIES LAWS UNLESS AND
         UNTIL THE  HOLDER  HEREOF  PROVIDES  (i)  INFORMATION  REASONABLY
         NECESSARY  TO CONFIRM THAT SUCH  REGISTRATION  IS NOT REQUIRED OR
         (ii) AN OPINION OF COUNSEL TO THE EFFECT  THAT SUCH  REGISTRATION
         IS NOT REQUIRED.

     The  Company  covenants  that all  shares of Common  Stock  delivered  upon
conversion of the Notes,  shall be duly authorized,  validly issued,  fully paid
and non-assessable and shall be free from preemptive rights and free of any lien
or adverse claim.

     2.7  Adjustment of Conversion  Price.  The  Conversion  Price shall be that
price set forth in Section 2.2 of this Note and shall be  adjusted  from time to
time by the Company in the event the  Company  shall (i) pay a dividend or other
distribution  in  shares of  Common  Stock to  holders  of  Common  Stock,  (ii)
subdivide its  outstanding  Common Stock into a greater number of shares,  (iii)
combine its  outstanding  Common  Stock into a smaller  number of shares or (iv)
reclassify  its  outstanding  Common  Stock,  the  Conversion  Price  in  effect
immediately  prior  thereto  shall be  adjusted  so that the  Holder of any Note
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common  Stock  which it would  have  owned or have  been  entitled  to
receive had such Note been converted  immediately prior to the happening of such
event.  An adjustment  made pursuant to this Section 2.7 shall become  effective
immediately  after the record date in the case of a dividend or distribution and
shall  become  effective  immediately  after the  effective  date in the case of
subdivision, combination or reclassification.

     2.8 Notice of  Adjustment.  Whenever the  Conversion  Price is adjusted the
Company  shall  promptly mail to the Holder a notice of the  adjustment  briefly
stating the facts requiring the adjustment and the manner of computing it.

     2.9 Notice of Certain Transactions. In case:

     (a) the Company shall declare a dividend (or any other distribution) on its
Common Stock (other than in cash out of retained earnings); or

     (b) of any  reclassification of the Common Stock of the Company (other than
a subdivision or combination of its outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any  consolidation  or merger to which the  Company  is a party and for which
approval  of any  stockholders  of the  Company is  required,  or of the sale or
transfer of all or substantially all of the assets of the Company; or

     (c) of the voluntary or involuntary dissolution,  liquidation or winding-up
of the Company;

the Company shall cause to be mailed to each the Holder at its address appearing
below or such other address as specified by the Holder,  as promptly as possible
but in any  event at least ten days  prior to the  applicable  date  hereinafter
specified,  a notice  stating  (i) the date on which a record is to be taken for
the  purpose of a dividend,  or, if a record is not to be taken,  the date as of
which the holders of Common  Stock of record to be entitled to such  dividend is
to  be   determined,   or  (ii)  the  date  on  which   such   reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is
expected to become  effective or occur,  and the date as of which it is expected
that  holders of Common  Stock of record  shall be entitled  to  exchange  their
Common  Stock  for   securities  or  other   property   deliverable   upon  such
reclassification,    consolidation,   merger,   sale,   transfer,   dissolution,
liquidation or winding-up.  Failure to give such notice,  or any defect therein,
shall not  affect the  legality  or  validity  of such  dividend,  distribution,
reclassification,    consolidation,   merger,   sale,   transfer,   dissolution,
liquidation or winding-up.

     2.10  Effect  of  Reclassification,   Consolidation,   Merger  or  Sale  on
Conversion  Privilege.  If any of the  following  shall occur,  namely:  (i) any
reclassification  or change of outstanding  shares of Common Stock (other than a
change in par value,  or from par value to no par value, or from no par value to
par  value,  or  as  a  result  of  a  subdivision  or  combination);  (ii)  any
consolidation,  combination or merger to which the Company is a party other than
a merger in which the Company is the continuing  corporation  and which does not
result in any  reclassification  of, or change  (other than a change in name, or
par value, or from par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination) in, outstanding shares of Common
Stock; or (iii) any sale or conveyance of all or substantially all of the assets
of the Company ("Asset Sale"),  then lawful  provision shall be made so that the
Holder shall thereafter be entitled to receive upon conversion of the Note, at a
per share valuation equal to the Conversion Price then in effect,  the number of
shares  of  stock or other  securities  or  property  of the  successor  Company
resulting from such reclassification, consolidation, consolidation, combination,
merger, or Asset Sale that the Holder of the would have been entitled to receive
in such reclassification,  consolidation, consolidation, combination, merger, or
Asset   Sale  if  the  Note  had  been   converted   immediately   before   such
reclassification,  consolidation,  consolidation,  combination, merger, or Asset
Sale,  all subject to further  adjustment  as  provided  herein.  The  foregoing
provisions   of  this  Section  2.10  shall   similarly   apply  to   successive
reorganizations,  consolidations,  mergers, sales and transfers and to the stock
or  securities  of any other  Company that are at the time  receivable  upon the
conversion of the Notes.

                          3. Subordination of the Note

     3.1 Note  Subordinate  to Senior  Indebtedness.  The Company  covenants and
agrees,  and the Holder,  by its  acceptance  thereof,  likewise  covenants  and
agrees, that, to the extent and in the manner hereinafter set forth, the payment
of the  principal  of and  interest  on  this  Note  is  hereby  expressly  made
subordinate  and subject in right of payment to the prior payment in full of all
Senior Indebtedness (as such term is defined in Section 3.3); provided,  that so
long as there is no default on the Senior Indebtedness and the payment would not
result in a default  thereunder,  this Note may be paid in  accordance  with its
terms when due. The  provisions  of this Section 3.1 are made for the benefit of
the holders of Senior  Indebtedness and such holders are made obligees hereunder
and any one or more of them may  enforce  such  provisions.  Holders  of  Senior
Indebtedness need not prove reliance on the subordination provisions hereof.

     3.2  Default  on  Senior   Indebtedness.   In  the  event  and  during  the
continuation  of any default in the payment of principal,  premium,  interest or
any other payment due on any Senior Indebtedness, or in the event that any event
of default with respect to any Senior  Indebtedness  shall have  occurred and be
continuing and shall have resulted in such Senior Indebtedness becoming or being
declared  due and  payable  prior to the date on which it would  otherwise  have
become due and payable  (unless and until such event of default  shall have been
cured or waived or shall have ceased to exist and such  acceleration  shall have
been rescinded or annulled) or in the event any judicial  proceeding  such event
of default,  then no payment  shall be made by the Company  with  respect to the
principal  of, or interest  on, this Note;  provided,  however,  nothing in this
Section shall prohibit the Holder from  accelerating  the  Obligations due under
this Note. In the event that,  notwithstanding the foregoing,  any payment shall
be received by the Holder when such payment is  prohibited  by this Section 3.2,
such  payment  shall be held in trust for the benefit of, and shall be paid over
or  delivered  to,  the  holders  of  Senior  Indebtedness  or their  respective
representatives,  or to the trustee or trustees under any indenture  pursuant to
which any of such Senior  Indebtedness may have been issued, as their respective
interests  may  appear,  but only to the extent  that the  holders of the Senior
Indebtedness (or their  representative or  representatives  or a trustee) notify
the Holder  within 30 days of such  payment of the amounts then due and owing on
the Senior  Indebtedness  and only the amounts  specified  in such notice to the
Holder shall be paid to the holders of Senior Indebtedness;  provided,  however,
that holders of Senior  Indebtedness shall not be entitled to receive payment of
any such  amounts to the  extent  that such  holders  would be  required  by the
subordination provisions of such Senior Indebtedness to pay such amounts over to
the  obligees  on trade  accounts  payable or other  liabilities  arising in the
ordinary course of the Company's business.

     3.3 Definition of Senior Indebtedness.  "Senior Indebtedness" means, unless
expressly  subordinated  to or made on a parity  with the amounts due under this
Note, the principal of (and premium,  if any),  unpaid  interest on,  penalties,
amounts reimbursable, fees, expenses, costs of enforcement and any other amounts
due in connection with (i) indebtedness of the Company, or with respect to which
the Company is a guarantor,  to banks,  commercial  finance  lenders,  insurance
companies,   leasing  or  equipment  financing  institutions  or  other  lending
institutions  regularly  engaged in the  business  of lending  money  (excluding
venture  capital,  investment  banking or similar  institutions  which sometimes
engage in lending  activities but which are primarily  engaged in investments in
equity  securities),  which is for money  borrowed,  or  purchase  or leasing of
equipment  in the case of lease or other  equipment  financing,  whether  or not
secured,  and (ii)  any  such  indebtedness  or any  debentures,  notes or other
evidence of indebtedness issued in exchange for such Senior Indebtedness, or any
indebtedness  arising from the  satisfaction  of such Senior  Indebtedness  by a
guarantor.

                        4. Piggyback Registration Rights

     4.1  Participation.  Subject to Section 4.2 and 4.3 hereof,  if at any time
after the date hereof the  Company  proposes  to file a  Registration  Statement
(other  than a  registration  on Form S-4 or S-8 or any  successor  form to such
Forms or any registration of securities as it relates to an offering and sale to
management of the Company  pursuant to any employee stock plan or other employee
benefit plan  arrangement)  with respect to an offering that includes any shares
of Common Stock,  then the Company shall give notice of the proposed filing (the
"Piggyback  Notice")  to all holders of  Conversion  Shares  issued  pursuant to
Section 2.2 or Section 2.4 of this Note (the "Registerable Security Holders") as
promptly as practicable  (but in no event less than fifteen (15) days before the
anticipated  filing  date).  The Piggyback  Notice shall offer the  Registerable
Security Holders the opportunity to register such number of Conversion Shares as
the  Registerable  Security  Holders  may  request  and  shall set forth (i) the
anticipated  filing date of such  Registration  Statement and (ii) the number of
shares of Common  Stock that is proposed  to be  included  in such  Registration
Statement.  The Company shall include in such Registration Statement such shares
of Conversion Shares for which it has received written requests to register such
shares within ten (10) days after the Piggyback Notice has been given.

     4.2 Underwriter's Cutback. Notwithstanding the foregoing, if a Registration
pursuant to this  Article 4 involves  an  underwritten  offering  ("Underwritten
Offering")  and the  managing  underwriter  or  underwriters  of  such  proposed
underwritten  offering delivers an opinion to the Registerable  Security Holders
that the total or kind of securities  which such  Registerable  Security Holders
and any other  persons  or  entities  intend to  include  in such  offering  are
reasonably  likely  to  significantly  adversely  affect  the  price,  timing or
distribution of the securities offered in such offering,  then the Company shall
include in such Registration:

     (a) If such  Registration was a primary  registration by the Company of its
securities,  the Company will include in such  Registration to the extent of the
number of securities which the managing  underwriter advises can be sold in such
Underwritten Offering:  first, the securities proposed by the Company to be sold
for its own account;  second,  any Conversion Shares requested to be included in
such Registration by the Registerable Security Holders, pro rata on the basis of
the  number  of  securities  sought  to be sold by the  requesting  Registerable
Security  Holders;  and third,  other  securities of the Company  proposed to be
included  in such  Registration,  allocated  among the  Company  and the holders
thereof in accordance  with the  priorities  then existing among the Company and
such holders.

     (b) If such  Registration  was  requested  other  than by the  Registerable
Security Holders or the Company,  the Company will include in such  Registration
to the extent of the number of securities which the managing underwriter advises
can be sold in such Underwritten Offering:  first, the securities proposed to be
sold by the security holder initiating the Registration;  second, any Conversion
Shares requested to be included in such  Registration,  pro rata on the basis of
the  number  of  securities  sought  to be sold by the  requesting  Registerable
Security  Holders;  third,  any securities of the Company  proposed by any other
Persons to be included in such Registration, pro rata on the basis of the number
of  securities  proposed to be sold by the  requesting  Persons;  and fourth the
securities proposed by the Company to be sold for its own account.

     4.3 Limitation on Participation. Holders of Conversion Shares that are able
to sell 100% of their Conversion Shares without  registration  under Rule 144 of
the  Securities  Act of 1933, as amended,  within a period of three  consecutive
months are not entitled to any Piggyback  Registration Rights under this Article
4.

     4.4 Expenses.  The Company will pay all Registration Expenses in connection
with each registration of Conversion  Shares requested  pursuant to this Article
4.

     4.5  Company  Control.  The  Company  may  decline  to file a  Registration
Statement  after  giving  the  Piggyback  Notice,  or  withdraw  a  Registration
Statement  after  filing  and  after  such  Piggyback  Notice,  but prior to the
effectiveness  of the  Registration  Statement,  provided that the Company shall
promptly notify each Registerable  Security Holder in writing of any such action
and  provided  further  that the  Company  shall  bear all  reasonable  expenses
incurred by such  Registerable  Security  Holder or otherwise in connection with
such withdrawn Registration Statement.

                                5. Miscellaneous

     5.1 Governing  Law. This Note is to be construed  according to the internal
laws of the State of Oklahoma.

     5.2 Loss,  Theft,  Destruction  or  Mutilation  of Note.  Upon  receipt  of
evidence reasonably satisfactory to the Company of the loss, theft,  destruction
or  mutilation  of this Note  and,  in the case of loss,  theft or  destruction,
delivery of an indemnity agreement reasonably satisfactory in form and substance
to the Company or, in the case of mutilation,  on surrender and  cancellation of
this Note,  the Company shall  execute and deliver,  in lieu of this Note, a new
Note executed in the same manner as this Note, in the same  principal  amount as
the unpaid  principal  amount of this Note and dated the date to which  interest
shall  have been paid on this Note or,  if no  interest  shall  have yet been so
paid, dated the date of this Note.

     5.3 Pari Passu Notes.  The Holder  acknowledges and agrees that the payment
of all or any portion of the outstanding principal amount of and all interest on
this Note shall be pari passu in right of payment  and in all other  respects to
the other Notes issued by the Company in the Private Placement Offering.  In the
event the Holder receives  payments in excess of its pro rata share of Company's
payments to the holders of all of the Notes, then the Holder shall hold in trust
all such excess  payments  for the benefit of the holders of the other Notes and
shall pay such amounts  held in trust to such other  holders upon demand by such
holders.

     5.4 Payment. All payments under this Note shall be made in lawful tender of
the United States.

     5.5 Usury.  In the event any  interest is paid on this Note which is deemed
to be in  excess of the then  legal  maximum  rate,  then  that  portion  of the
interest payment representing an amount in excess of the then legal maximum rate
shall be deemed a payment of principal and applied against the principal of this
Note.

     5.6  Notices.  Any  notice,  request  or other  communication  required  or
permitted   hereunder  shall  be  given  in  accordance  with  the  Subscription
Agreement.

     5.7 Successors  and Assigns.  This Note may be only assigned or transferred
by the Holder in compliance  with all  applicable  federal and state  securities
law. The rights and obligations of the Company and the Holder of this Note shall
be  binding  upon  and  benefit  the  successors,   permitted  assigns,   heirs,
administrators and transferees of the parties.


     IN WITNESS WHEREOF,  the Company has executed this instrument effective the
date first above written.

                                      THE BEARD COMPANY, an Oklahoma corporation


                                      By
                                          Herb Mee, Jr., President

                                      (the "Company")

<PAGE>
                                                                       EXHIBIT A

                                CONVERSION NOTICE

To convert this Note into common stock of the Company, check the box:  [  ]

To convert only part of this Note, state the amount:

                                 [ $---------- ]

If you want the stock certificate made out in another person's name, fill in the
form below:

-----------------------------------------------------------------
   (Insert other person's social security or tax I.D. number)

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

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

-----------------------------------------------------------------
   (Print or type assignee's name, address and zip code)

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

Date: ____________________             __________________________
                                             (Signature)

-----------------------------------------------------------------
(Sign exactly as your name appears on this Note)