Document:

REPLACEMENT
                              RENEWAL AND EXTENSION
                                 PROMISSORY NOTE

$2,785,000.00                                            Oklahoma City, Oklahoma
                                                                  March 26, 2004

     For value  received,  the  undersigned,  The  Beard  Company,  an  Oklahoma
corporation  (the "Maker"),  agrees to all of the terms of this  Promissory Note
(this  "Note") and promises to pay to the order of William M. Beard and Lu Beard
as  Trustees  of the  William  M. Beard and Lu Beard  1988  Charitable  Unitrust
(individually and collectively called the "Holder"),  at Enterprise Plaza, Suite
320, 5600 N. May,  Oklahoma City,  Oklahoma 73112, or at such other place as may
be  designated  in writing by the Holder of this Note,  the principal sum of Two
Million Seven Hundred  Eighty-Five  Thousand  Dollars  ($2,785,000.00)  plus all
interest accruing thereon. This Note will be payable as follows:

     Prior to  Default  the  unpaid  principal  balance  of this  Note will bear
     interest at the rate of ten percent (10%) (the "Applicable Rate"). Interest
     will commence to accrue on the unpaid principal balance of this Note on the
     date hereof and thereafter  until this Note is paid in full.  Interest will
     be  computed  for the actual  number of days  elapsed at a per diem  charge
     based on a year  consisting of three hundred sixty (360) days. All payments
     will  be  applied  first  to any  accrued  interest  on this  Note  and the
     remainder to the principal  balance of the Note. The outstanding  principal
     balance plus unpaid accrued interest are due and payable on April 1, 2006.

     Except as otherwise  defined herein,  all terms defined in the Restated and
Amended  Letter Loan  Agreement of even date herewith  between the Maker and the
Holder (the "Loan  Agreement")  will have the same meanings as therein,  and the
Holder  recognizes  that it is subject to all of the provisions set forth in the
Amendment to Restated and Amended Letter Loan Agreement dated June 25, 2004 (the
"Amended Loan  Agreement).  Both  principal and interest  owing  pursuant to the
terms of this Note are payable in the lawful  currency  of the United  States of
America and in immediately  available funds. All payments made on this Note will
be applied to this Note when received by the Holder  hereof in collected  funds.
Any sum not paid when due will bear interest at the rate equal to the Applicable
Rate  plus  five  percent  (5.0%)  and  will be paid at the  time  of,  and as a
condition precedent to, the curing of any Event of Default. During the existence
of any Event of Default,  the Holder of this Note may apply payments received on
any  amount  due  hereunder  or  under  the  terms of any  instrument  hereafter
evidencing or securing said indebtedness as the Holder may determine.

     The Maker 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,  the Maker will pay to the Holder all reasonable  attorney's fees and
all expenses incurred by the Holder in connection therewith.

     THIS NOTE IS GIVEN BY THE MAKER AND  ACCEPTED  BY THE HOLDER  PURSUANT TO A
LENDING  TRANSACTION  CONTRACTED,  CONSUMMATED,  AND TO BE PERFORMED IN OKLAHOMA
CITY, OKLAHOMA COUNTY,  OKLAHOMA,  AND THIS NOTE SHALL BE CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF  OKLAHOMA.  In the event of any Event of  Default,  the
Holder may  request,  and the Maker  agrees to furnish to the Holder,  agreeable
collateral and such security  agreements as the Maker may reasonably  require to
secure the indebtedness.

     This Note is issued  subject  to the  terms of the Loan  Agreement  and the
Amended Loan Agreement (collectively,  the "Loan Agreements").  On the breach of
any  provision  of this Note,  or any  provision of the Loan  Agreements  at the
option of the Holder, the entire unpaid indebtedness evidenced by this Note will
become due,  payable and collectible then or thereafter as the Holder may elect,
regardless of the date of maturity of this Note.  Notice of the exercise of such
option is hereby expressly waived. Failure by the Holder to exercise such option
will not  constitute  a waiver of the right to exercise the same in the event of
any subsequent default.

     The  failure of the Holder to exercise  any of the  remedies or options set
forth in this Note,  or in any  instrument  securing  payment  hereof,  upon the
occurrence  of one or more Events of Default,  shall not  constitute a waiver of
the right to exercise  the same or any other  remedy at any  subsequent  time in
respect to the same or any other Event of Default.  The acceptance by the Holder
of any  payment  which is less than the total of all  amounts due and payable at
the time of such payment shall not  constitute a waiver of the right to exercise
any of the foregoing remedies or options at that time or any subsequent time, or
nullify any prior exercise of such remedy or option, without the express consent
of the Holder.

     Time is of the essence of each obligation of the Maker hereunder.

     The makers, endorsers,  sureties,  guarantors and all other persons who may
become liable for all or any part of this obligation severally waive presentment
for payment,  protest, demand and notice of nonpayment.  Said parties consent to
any extension of time (whether one or more) of payment hereof,  the modification
(whether one or more) of payment hereof,  release or substitution of all or part
of the  security  for the  payment  hereof or  release  of any party  liable for
payment of this  obligation.  Any such  extension or release may be made without
notice  to any  such  party  and  without  discharging  such  party's  liability
hereunder.

     The Maker has the right to prepay this Note in whole or in part at any time
and from time to time without premium or penalty,  but with accrued  interest to
the date of the prepayment on the amount prepaid.

     The Maker waives presentment for payment, protest and notice of nonpayment.

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

ATTEST:                                     THE BEARD COMPANY

/s/Rebecca G. Witcher                       /s/Herb Mee, Jr.
---------------------------                 -----------------------------------
Rebecca G. Witcher, Secretary               Herb Mee, Jr., PresidentWHEN RECORDED RETURN TO:

James W. Sharrock, Esq.
McAfee & Taft
211 North Robinson, Suite 10th Floor
Two Leadership Square
Oklahoma City, Oklahoma 73102-7103

                    DEED OF TRUST, ASSIGNMENT OF PRODUCTION,
                   SECURITY AGREEMENT, AND FINANCING STATEMENT

STATE OF COLORADO          ss.
                           ss.
COUNTY OF MONTEZUMA        ss.
COUNTY OF DELORES          ss.

     DEED OF TRUST,  ASSIGNMENT OF PRODUCTION,  SECURITY AGREEMENT AND FINANCING
STATEMENT  dated as of May 21,  2004 (the "Deed of  Trust"),  between  THE BEARD
COMPANY  ("Borrower"),  and the PUBLIC  TRUSTEE OF  MONTEZUMA  COUNTY,  COLORADO
("Trustee")  for the benefit of MCELMO DOME  NOMINEE,  LLC, an Oklahoma  limited
liability  company,  Enterprise  Plaza,  Suite 320, 5600 N. May,  Oklahoma City,
Oklahoma 73112 (the "Beneficiary").

A POWER OF SALE HAS BEEN  GRANTED  IN THIS  DEED OF  TRUST.  A POWER OF SALE MAY
ALLOW THE TRUSTEE TO TAKE THE PROPERTIES IN TRUST AND SELL THEM WITHOUT GOING TO
COURT IN A  FORECLOSURE  ACTION UPON DEFAULT BY THE BORROWER  UNDER THIS DEED OF
TRUST.

THIS INSTRUMENT CONTAINS AFTER ACQUIRED PROPERTY PROVISIONS, SECURES THE PAYMENT
OF FUTURE ADVANCES, AND COVERS PROCEEDS OF COLLATERAL.

                                 R E C I T A L S

     A. The  Borrower  has  executed  and  delivered  to William M. Beard and Lu
Beard, as Trustees of the William M. Beard and Lu Beard 1988 Charitable Unitrust
(the "Unitrust") that certain  Promissory Note in the original  principal amount
of $2,800,000,  dated as of March 26, 2004, (the "Unitrust Note").  The Unitrust
Note is given in renewal and  extension  of that certain  Promissory  Note dated
October 3, 2003 in the original principal amount of $3,000,000,  executed by the
Borrower and payable to Unitrust (the "Prior Unitrust Note").

     B.   Unitrust  has  executed   and   delivered  to  Boatright   Family  LLC
("Boatright")  that certain  Promissory Note dated  May 21, 2004 in the original
principal  amount of $500,000 (the "Boatright  Note").  The proceeds of the loan
evidenced by the Boatright  Note have been used by Unitrust to purchase  certain
promissory notes from the Borrower.

     C. Borrower,  as grantor, has previously executed and delivered to Trustee,
for the  benefit of  Beneficiary,  a Deed of Trust,  Assignment  of  Production,
Security  Agreement,  and Financing Statement dated as of February 21, 2003 (the
"2003 Deed of Trust"),  covering the  Properties,  as hereinafter  defined,  and
recorded on March 24,  2003,  under  recording  number  511638 of the records of
Montezuma County, Colorado, and under recording number 00145869, book 0320, page
208 of the  records of Dolores  County,  Colorado.  The  beneficial  interest of
Beneficiary  under the 2003 Deed of Trust is subject to Nominee  Agreement  (the
"2003  Nominee  Agreement")  between  Unitrust  and  Beneficiary,  as more fully
described in the 2003 Deed of Trust.

     D. The Unitrust,  Boatright and Beneficiary  have entered into that certain
Subordination and Nominee Agreement dated  May 21, 2004, (as same may be amended
from time to time, the "2004 Nominee Agreement") under which (1) the Beneficiary
has  agreed to act as the  agent and  nominee  on  behalf  of the  Unitrust  and
Boatright  (collectively,  the  "Noteholders")  with respect to all benefits and
rights  existing  or  arising  under  this Deed of Trust,  and (2) the  relative
priorities  to proceeds  under this Deed of Trust are  allocated  as between the
Unitrust and Boatright.

     E.  Borrower has agreed to enter into this Deed of Trust in order to secure
payment of the Unitrust Note and the Boatright Note (collectively, the "Notes").

     F. The Borrower is the owner of undivided  interests in and to the oil, gas
and mineral  leases  described  on Exhibit "A"  attached  hereto and made a part
hereof for all purposes to this Deed of Trust.

                         G R A N T I N G   C L A U S E

     NOW,  THEREFORE,  the  Borrower,  in order to secure the  indebtedness  and
obligations  hereinafter  described,  does hereby GRANT, BARGAIN,  SELL, CONVEY,
TRANSFER,  ASSIGN,  and SET OVER to Trustee in trust, and specifically  grant to
and  confirm  upon the  Trustee  in  trust,  the  power to sell,  the  following
described property:

     (a) Carbon Dioxide Producing  Properties.  All Borrower's right, title, and
interest,  now  owned or  hereafter  acquired,  in and to (i) the  oil,  gas and
mineral leases set forth on Exhibit "A" (the  "Leases"),  and the rights derived
therefrom, and any instrument executed in amendment,  correction,  modification,
confirmation, renewal, or extension of any one or more of those leases; (ii) the
carbon dioxide in and under the lands covered by the leases described on Exhibit
"A;" (iii) lands spaced,  pooled or unitized with the lands described at Exhibit
"A;" (iv) any and all units  (including,  without  limitation,  the McElmo  Dome
Unit) covering,  in whole or in part, the lands covered by the leases  described
on  Exhibit  "A;" and (v) all oil and gas  leases in which  Borrower  now has or
hereafter  acquires an interest due to the pooling or unitization of the oil and
gas leases  described  on  Exhibit  "A" or the land  covered  by such  leases or
portions of such lands or leases. It is expressly understood and agreed that (1)
neither  the  Trustee  nor the  Beneficiary  shall be liable in  respect  of the
performance  of any  covenant or  obligation  of the  Borrower  concerning  such
leases,  and  (2) any  decimal  fractional  interests  set  out on  Exhibit  "A"
pertaining  to such oil and gas  leases  have been  appended  for  informational
purposes  only,  and shall not limit in any way  whatsoever  the interest of the
Trustee in the leases which are subject to this Deed of Trust.

     (b) Wells and Equipment.  All interest of Borrower which is attributable to
the  carbon  dioxide  producing  properties  assigned  under  and  described  in
subparagraph  (a)  immediately  above in and to all carbon dioxide wells,  other
wells,  equipment,  tanks,  derricks,  fixtures,  houses,  pumps, jacks, casing,
tubing, rods, cable lines, machinery, pipe lines, flow lines, and, without being
limited by the particularity of the foregoing, all other and additional personal
property and fixtures of every kind and character  now or at any time  hereafter
located on any of the lands  described  or referred to in Exhibit  "A," or which
may now or hereafter be used or obtained in connection therewith.

     (c) Contract Rights.  All interest of Borrower which is attributable to the
carbon dioxide producing properties conveyed under and described in (a) above in
and  to  all  valid  and  subsisting  operating  agreements,   production  sales
contracts,  unitization and pooling  agreements and orders,  farmout  contracts,
assignments,  rights-of-way,  easements,  surface leases, licenses, permits, and
other contracts pertaining to or affecting the lands, leases, or wells described
or referred to in Exhibit "A."

     (d)  Accounts,  General  Intangibles.  All  rights  now owned or  hereafter
acquired by  Borrower in all (i)  accounts  and general  intangibles  arising in
connection with the sale or other  disposition of the property  described in (a)
through (c) above, and (ii) any and all contract rights and general  intangibles
arising from or in  connection  with the  property  described in (a) through (c)
above.

     (e) Products,  Proceeds.  All of Borrower's interest in and to the products
and  proceeds  of the  property  described  in (a)  through  (d) above,  whether
presently existing or hereafter created or arising.

     The  interests  and  estates  described  in (a)  through  (e) above are all
hereinafter sometimes collectively referred to as the "Properties."

     TO HAVE AND TO HOLD all of Borrower's  right,  title and interest in and to
the Properties  unto the Trustee and his successors or substitutes and to his or
their successors and assigns, IN TRUST, however, upon the terms,  provisions and
conditions herein set forth.

                                   ARTICLE 1

                                  INDEBTEDNESS

     This  Deed of Trust is given to  secure  and  enforce  the  payment  of the
following indebtedness, to-wit:

     (a) All  indebtedness  arising  pursuant to the  provisions of this Deed of
Trust, and any and all renewals or extensions of such indebtedness,  or any part
thereof;

     (b) All  loans,  principal,  interest,  fees,  expenses,  obligations,  and
liabilities  of the  Borrower  arising  pursuant to the Unitrust  Note,  and all
obligations  and  liabilities  of Borrower,  absolute or  contingent,  due or to
become due, which are now or may at any time hereafter be owing by Borrower with
respect to the Unitrust  Note,  and all renewals,  extensions  or  modifications
thereof  or  substitutions  therefore,  and  all  other  documents  executed  in
connection therewith;

     (c) All  loans,  principal,  interest,  fees,  expenses,  obligations,  and
liabilities  of the Unitrust  arising  pursuant to the Boatright  Note,  and all
obligations  and  liabilities  of Unitrust,  absolute or  contingent,  due or to
become due, which are now or may at any time hereafter be owing by Unitrust with
respect to the Boatright  Note,  and all renewals,  extensions or  modifications
thereof  or  substitutions  therefore,  and  all  other  documents  executed  in
connection therewith;

     (d) The  performance of all  obligations of the Borrower under this Deed of
Trust as well as all renewal,  extensions,  modifications  and amendments of the
foregoing.

     The words  "Indebtedness," as used herein, shall mean all the indebtedness,
obligations,  and  liabilities  described  or referred to  immediately  above in
sub-paragraphs (a) through (d), inclusive.

                                   ARTICLE 2

                         REPRESENTATIONS AND WARRANTIES

     Borrower represents, warrants, and covenants that the this Deed of Trust is
the legal,  valid,  and  binding  obligations  of the  Borrower  enforceable  in
accordance  with  its  respective  terms,   except  as  limited  by  bankruptcy,
insolvency or other laws of general  application  relating to the enforcement of
creditors' rights;  that Borrower is the lawful owner of undivided  interests or
rights in and to the  Properties as set forth in Exhibit "A" and the  properties
assigned in Article 5 hereof and has good right and authority to grant, bargain,
sell, transfer,  assign,  affect, pledge, and hypothecate the same; that all the
Leases  insofar as they cover the  formation  described at Exhibit "A" are valid
and subsisting and are in full force,  and the Properties are not subject to any
burdens or charges  except as reflected in Exhibit "A;" that the  Properties and
the properties assigned in Article 5 hereof are, to Borrower's actual knowledge,
free and clear from all perfected liens,  burdens,  and encumbrances  except the
lien  evidenced  by this  Deed of Trust  and such  liens as may be set  forth on
Exhibit "A;" that, to Borrower's actual knowledge,  all producing wells in which
Borrower  has any  right or  interest  located  on the  Properties  or  property
unitized therewith have been drilled,  operated, and produced in conformity with
all  applicable  laws and  rules,  regulations,  and  orders  of all  regulatory
authorities  having  jurisdiction  and are subject to no penalties on account of
past production;  that, to Borrower's actual  knowledge,  none of such wells are
deviated from the vertical more than the maximum  permitted by applicable  laws,
rules,  regulations,  and orders; that such wells are in fact bottomed under and
are producing  from, and the well bores are wholly within,  the lands covered by
the Properties or properties unitized  therewith.  The acquisition and ownership
by Borrower of the Properties and the properties  assigned in Article 5, and the
execution and delivery of this Deed of Trust and compliance  with the provisions
hereof,  were  and are  within  its  corporate  powers  and did not and will not
contravene any provision of any applicable laws, rules, regulations,  or orders,
or of its governing  documents or constitute a default  under,  or result in the
creation of any lien, charge,  encumbrance, or security interest (other than the
lien of the  security  interest  created by this Deed of Trust)  upon any of its
property or assets pursuant to any indenture or other agreement or instrument to
which it is a party or by which  it or its  property  may be bound or  affected.
These warranties and  representations  shall at all times be construed to be for
the benefit of the Beneficiary,  and they shall remain in full force and effect,
notwithstanding  the  assignment  hereof,  or the  partial  release  of the lien
hereof, or any foreclosure thereof.

                                   ARTICLE 3

                                   COVENANTS

     3.1 The Borrower,  for Borrower and Borrower's  successors covenants to use
its  commercially  reasonable  efforts (a)  properly to operate,  or cause to be
operated  properly,  and to keep, or cause to be kept, in full force and effect,
insofar as they cover the formation  described at Exhibit "A" and to perform, or
cause to be performed,  all covenants,  terms and conditions  whether express or
implied imposed upon the original lessee,  or his assigns,  whether continued in
any such lease,  or in any assignment  thereof,  and  continuously to operate or
cause to be operated in a good and  workmanlike  manner the well or wells now or
hereafter  located on the land covered by the interests or estates  described in
Exhibit "A;" (b) to comply with all applicable laws, and all rules,  regulations
and orders of all regulatory  authorities  having  jurisdiction  to regulate the
operation of the  Properties and production and sale of carbon dioxide and other
minerals,  produced  thereupon;  (c) to carry, in standard  insurance  companies
satisfactory to the Beneficiary,  in respect of all activities in which Borrower
might incur  personal  liability for the death or injury of an employee or third
person, or damage to or destruction of another's property, worker's compensation
insurance,  and public liability and property-damage  insurance, in such amounts
as may,  in the  Beneficiary's  opinion,  be  adequate,  and,  in respect of all
personal property and fixtures constituting a part of the Properties,  to carry,
in standard  insurance  companies  satisfactory  to the  Beneficiary,  insurance
against loss or damage by fire,  lightning,  hail,  tornado,  explosion and such
other risks as are usually  insured  against in similar  businesses,  in amounts
satisfactory to the Beneficiary, and with loss payable to the Beneficiary as its
interest may appear, and upon request of the Beneficiary promptly to deliver the
policies to the Beneficiary; (d) to pay, or cause to be paid, before delinquent,
all lawful taxes of every character in respect of all of the Properties, and all
taxes in respect of the carbon  dioxide and other  minerals  produced  and to be
produced  from  the  Properties,  or  incident  to and in  connection  with  the
operation or development  thereof and the production of carbon dioxide and other
minerals  therefrom,  as well as all  Federal  or  State  income  taxes  payable
generally by Borrower,  regardless of their relation to the  Properties,  and to
pay, as and when due, all State and Federal Social Security taxes,  payments and
contributions  for which  Borrower may be liable;  (e) at all times to maintain,
preserve,  and keep all said property,  and all appurtenances  thereto,  and all
buildings,  improvements,  machinery, equipment, pipe lines, fixtures, and other
personal property of every kind and character, in respect of the Properties,  in
thorough  repair,  working order and  condition,  and from time to time make all
necessary and proper repairs, renewals,  replacements and substitutions;  (f) in
respect of all the Properties, promptly to pay all bills for labor and material,
and  never to  permit  to be  created  or to  exist,  in  respect  of any of the
Properties,  any other or  additional  lien, on a parity with or superior to the
lien  hereof;  (g) at any time  and  from  time to  time,  upon  request  by the
Beneficiary,  forthwith  at  Borrower's  expense to execute  and  deliver to the
Beneficiary, any and all additional instruments and further assurances as may be
necessary or proper, in the Beneficiary's opinion, to effect the intent of these
presents;  (h) to keep accurate  books and records in accordance  with generally
accepted  accounting  principles  consistently  applied in which full,  true and
correct  entries shall be promptly made as to all operations on the  Properties,
all such books and records to be subject at all times during reasonable business
hours to inspection by the Beneficiary,  or its duly authorized agent or agents;
(i) from time to time, upon request of the  Beneficiary,  promptly to furnish to
the Beneficiary such financial statements and reports relating to Borrower,  and
Borrower's  business  affairs,  and  the  operation  of  the  Properties  as the
Beneficiary  may  reasonably  request  (j) to  maintain  Borrower's  right to do
business in Colorado;  (k) to pay all  Indebtedness in accordance with the terms
thereof  and  hereof,  or  when  the  maturity  thereof  may be  accelerated  in
accordance  with the terms thereof or hereof;  and (l) to notify the Beneficiary
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,  could become an Event of Default,  or the failure of the Borrower
to observe any of its  undertakings  hereunder;  and (m) not to transfer,  sell,
assign, hypothecate, pledge or encumber any of the Properties.

     3.2 With respect to any part of the Properties  which is not a leasehold or
working  interest,  Borrower  agrees to take all such action and to exercise all
rights and remedies as are available to Borrower to cause the owner or owners of
the  working  interest  in such  properties  to comply  with the  covenants  and
agreements contained herein. With respect to any part of the Properties which is
a working  interest  but  which is  operated  by a party  other  than  Borrower,
Borrower  agrees to take all such action and to exercise all rights and remedies
as are  available to Borrower  (including,  but not limited to, all rights under
any  operating  agreements)  to cause  the  party  who is the  operator  of such
property to comply with the covenants and agreements contained herein.  Borrower
will immediately notify the Beneficiary of any failure of the operator of any of
the  Properties  to perform any such  obligation,  and in  cooperation  with the
Beneficiary,  will  take such  steps as may be  expedient  to secure  compliance
therewith, or obtain appointment of a different operator.

     3.3 Any and all  covenants in this Deed of Trust may from time to time,  by
instrument in writing signed by Beneficiary and delivered to Borrower, be waived
to such extent and in such  manner as the  Beneficiary  may desire,  but no such
waiver shall ever affect or impair the Beneficiary's  rights or liens hereunder,
except to the extent so specifically stated in such written instrument.

                                   ARTICLE 4

                              DEFAULTS AND REMEDIES

     4.1 Any of the following  shall  constitute  Events of Default (each herein
called an "Event of Default"):

     (a)  Nonpayment.  (i)  Default  in the  due  and  punctual  payment  of any
principal of the  Indebtedness,  or (ii) default in the due and punctual payment
of any interest of the  Indebtedness or any fee or expense payable  hereunder or
under the Notes.

     (b) Covenant Default.  The Borrower shall default in the due performance or
observance  by it of any term,  covenant or agreement  contained in this Deed of
Trust,  and such failure  shall  continue for thirty (30) days after the earlier
of: (i) notice of such default from the Beneficiary;  or (ii) the Beneficiary is
notified  of such  default  or should  have  been so  notified  pursuant  to the
provisions of Section 3.1(n) hereof.

     (c)  Representations  and  Warranties.  Any  representation,   warranty  or
statement  made by the Borrower  herein or  otherwise  in writing in  connection
herewith or in connection  with the Notes and the agreements  referred to herein
or therein or in any financial statement, certificate or statement signed by any
officer or employee of the  Borrower  and  furnished  pursuant to any  provision
hereof  or of the  Notes  shall  be  breached,  or shall  be  materially  false,
incorrect or incomplete when made.

     (d) Other Debt. The Borrower shall fail to make any payment of principal or
interest on any other indebtedness of Borrower.

     (e) Default in Notes.  Any event of default shall occur under the Notes and
the default shall continue unremedied beyond any grace or cure period.

     (f) Judgments and Decrees.  The Borrower  shall suffer a final judgment for
the payment of money and shall not  discharge the same within a period of thirty
(30) days.  Any order,  judgment  or decree  shall be entered in any  proceeding
against the Borrower decreeing the split up of the Borrower and such order shall
remain undischarged or unstayed for a period in excess of thirty (30) days.

     (g) Bankruptcy.  (i) The Borrower  pursuant to or within the meaning of any
Bankruptcy Law (as herein  defined) (a) commences a voluntary case, (b) consents
to the entry of an order for relief  against  it in any  involuntary  case,  (c)
consents to the  appointment of a Custodian (as herein defined) of it for all or
substantially  all of its property,  or (d) makes a general  assignment  for the
benefit of its creditors;  or (ii) a court of competent  jurisdiction  enters an
order or decree under any Bankruptcy Law that remains unstayed and in effect for
thirty (30) days that (a) is for relief  against the Borrower in an  involuntary
case, (b) appoints a Custodian of the Borrower for all or  substantially  all of
its  property,  or  (c)  orders  the  liquidation  of  the  Borrower.  The  term
"Bankruptcy  Law" means Title 11, U. S. Code or any similar federal or state law
for the relief of debtors.  The term  "Custodian"  means any receiver,  trustee,
assignee, liquidator or similar official under any Bankruptcy Law.

     (h)  Validity  of Notes.  The Notes  shall  cease to be a legal,  valid and
binding agreement enforceable against any party executing the same in accordance
with the respective terms thereof, or shall in any way be terminated,  or become
or be declared ineffective or inoperative,  or shall in any way whatsoever cease
to give or provide  the  respective  rights,  remedies,  powers  and  privileges
intended to be created thereby.

     4.2 Upon the occurrence of an Event of Default:

     (a) The  Beneficiary  may declare the entire  balance of  principal  of the
Indebtedness or any portion thereof,  along with all accrued  interest  thereon,
immediately due and payable,  whereupon the same shall forthwith  become due and
payable,   without  notice  or  demand,   presentment  for  payment,  notice  of
non-payment,  protest, notice of protest, notice of intent to accelerate, notice
of  acceleration,  and all  other  notices,  all of which  the  Borrower  hereby
expressly waives to the full extent permitted by applicable law; and

     (b) The  Beneficiary  shall have the right to declare a violation of any of
the covenants  herein  contained and elect to advertise the  Properties for sale
and demand such sale,  then,  upon filing notice of such election and demand for
sale with the  Trustee,  who shall upon  receipt of such notice of election  and
demand  for sale  cause a copy of the same to be  recorded  in the office of the
Clerk and Recorder of the county in which the Properties are situated,  it shall
and may be lawful for the  Trustee to sell and  dispose of the same (en masse or
in separate parcels, as Beneficiary may designate), and all the right, title and
interest  of said  Borrower,  their  successors  or assigns  therein,  at public
auction  at the main  front  door of the  Courthouse  in the county in which the
Properties are located or on the  Properties or any part thereof,  or such other
place as may be  authorized  or  permitted  by law, as may be  specified  in the
notice of said sale, for the highest and best price the same will bring in cash,
four weeks' public notice having been previously  given of the time and place of
such sale, by advertisement  weekly, in some newspaper of general circulation at
that time  published  in said  county,  a copy of which  notice  shall be mailed
within  ten (10)  days  from the date of the first  publication  thereof  to the
Borrower at the address herein given and to such person or persons  appearing to
have  acquired a subsequent  record  interest in the  Properties  at the address
given in the recorded  instrument  evidencing such interest,  and where only the
county and state are given as the  address,  then such notice shall be mailed to
the county  seat,  and to make and give to the  purchaser or  purchasers  of the
Properties at such sale, a certificate  or  certificates  in writing  describing
such Properties purchased,  and the sum or sums paid therefor, and the time when
the purchaser or purchasers (or other person entitled thereto) shall be entitled
to a deed or deeds therefor, unless the same shall be redeemed as is provided by
law;  and the Trustee  shall,  upon demand by the person or persons  holding the
said certificate or certificates of purchase,  when said demand is made, or upon
demand by the person entitled to a deed to and for the Properties purchased,  at
the time such demand is made the time for redemption  having  expired,  make and
execute to such person or persons a deed or deeds to the  Properties  purchased,
which said deed or deeds  shall be in the  ordinary  form of a  conveyance,  and
shall be signed,  acknowledged  and delivered by the Trustee,  as Borrower,  and
shall convey and quit claim to such person or persons  entitled to such deed, as
grantee,  the  Properties  purchased  as  aforesaid  and all the  right,  title,
interest, benefit and equity of redemption of the Borrower its heirs, successors
and assigns  therein,  and shall recite the sum or sums for which the Properties
were sold and shall refer to the power of sale herein contained, and to the sale
or sales made by virtue hereof; and in case of an assignment of such certificate
or certificates of purchase,  or in the case of the redemption of the Properties
by a  subsequent  encumbrancer,  such  assignment  or  redemption  shall also be
referred to in such deed or deeds; but the notice of sale need not be set out in
such deed or deeds and the Trustee shall,  out of the proceeds or avails of such
sale,  after first paying and  retaining  all fees,  charges and costs of making
said sale,  pay to  Beneficiary  the  principal  and  interest  due on the Notes
according  to  the  tenor  and  effect  thereof,  and  all  monies  advanced  by
Noteholders as applicable with interest thereon at the default rate set forth in
the  Notes,   rendering  the  overplus,   if  any,  unto  Borrower,   its  legal
representatives  or assigns;  which sale or sales and said deed or deeds so made
shall be a perpetual bar, both in law and equity,  against Borrower,  its heirs,
successors and assigns,  and all other persons  claiming the Properties,  or any
part thereof, by, from, through or under the Borrower.  The holder or holders of
the Notes may purchase the  Properties or any part thereof;  and it shall not be
obligatory  upon the  purchaser  or  purchasers  at any such  sale to see to the
application  of the purchase  money.  Nothing  herein  pertaining to foreclosure
proceedings or specifying particular actions to be taken by Beneficiary shall be
deemed to contradict or add to the requirements and procedures (now or hereafter
existing)  of  Colorado  law and any such  conflict  or  inconsistency  shall be
resolved in favor of Colorado law applicable at the time of foreclosure; and

     (c) The Beneficiary may, at its election,  proceed by suit or suits, at law
or in equity,  to enforce  the  payment  of the  Indebtedness,  and of the notes
evidencing  it. On or at any time after the filing of  judicial  proceedings  to
protect or enforce the rights of the Beneficiary,  the Beneficiary,  as a matter
of right and without regard to the sufficiency of the security,  and without any
showing of insolvency, fraud, or mismanagement on the part of Borrower, shall be
entitled to the  appointment of a receiver or receivers of all or any portion of
the Properties,  and of the income,  rents,  issues,  and profits  thereof,  and
Borrower does hereby  consent to the  appointment  of such receiver or receivers
and  agrees  not to oppose  any  application  therefor.  It is  agreed  that the
Beneficiary may be the purchaser of the Properties,  or any part thereof, at any
sale thereof, or upon any other foreclosure of the lien hereof or otherwise, and
the Beneficiary so purchasing  shall,  upon any such purchase,  acquire title to
the Properties so purchased, free of the lien of these presents; and

     (d) The  Beneficiary  may institute suit to foreclose the lien of this Deed
of Trust in any court having  jurisdiction  whether or not Beneficiary has begun
to  exercise  its  rights  under  Section  5.2(b)  hereof.  In any such suit the
Beneficiary may, at its option, apply for and shall be entitled,  as a matter of
right,  to the  appointment  of a receiver  to take  possession  and control of,
operate,  maintain,  and preserve the Properties or any part thereof,  including
the production  and sale of all carbon dioxide and other minerals  therefrom and
to disburse the proceeds from the sale of such products for application upon the
Indebtedness  and other sums then due the  Beneficiary  hereunder until the same
and all costs are fully  paid.  The  Borrower  hereby  waives  all notice of the
filing and hearing of any such application for the appointment of a receiver and
irrevocably consent to every appointment made pursuant thereof; and

     (e) The Beneficiary may exercise its rights under Article 6 hereof.

     4.3 Borrower further agrees that in the event of any foreclosure  sale, the
Properties or any part thereof may be sold with or without  appraisement  as the
Beneficiary  may elect,  and such election may be exercised at any time prior to
the entry of the decree of foreclosure;  that should  Beneficiary  elect to have
the property sold without  appraisement,  then Borrower  hereby  expressly waive
appraisement;  that the Beneficiary may further elect to have said property sold
together, or in separate parcels; that the proceeds from such sale, after paying
therefrom the costs advanced or incurred by the  Beneficiary in the  foreclosure
suit,  including  the costs of sale and any costs and  expenses  incurred in the
operation of said property by a receiver  appointed upon the  application of the
Beneficiary,  shall be applied,  FIRST, to the payment of all costs and expenses
incurred by the Beneficiary in its operation of said property, if the same be so
operated,  and any and all sums advanced by the  Beneficiary  for the purpose of
enforcing its rights hereunder or protecting the security, with interest on such
amounts at the  highest  legal  rate,  and  SECOND,  to the payment of all other
Indebtedness  and  other  sums  then  secured  hereby,  including  interest  and
attorneys' fees, in such order of application as the Beneficiary may elect.

     4.4 In the event of any default upon the part of Borrower,  the Beneficiary
is  authorized  to cause to be made  whatever  abstracts  of title  and/or title
opinions  are deemed  necessary  by  Beneficiary's  attorneys.  The cost of said
abstracts shall be added to the Indebtedness.

     4.5 To the full extent  Borrower may do so,  Borrower  agrees that Borrower
will not at any time insist upon, plead, claim, or take the benefit or advantage
of any law now or hereafter in force providing for any appraisement,  valuation,
stay,  extension,  or  redemption,   and  Borrower,  for  Borrower,   Borrower's
successors  and assigns,  and for any and all persons or entities  ever claiming
any interest in the  Properties,  to the extent  permitted by law, hereby waives
and  releases  all  rights  of  redemption,  valuation,  appraisement,  stay  of
execution,  notice  of  election  to  mature  or  declare  due the  whole of the
Indebtedness and all rights to a marshaling of the assets of Borrower, including
the  Properties,  or to a sale in inverse  order of  alienation  in the event of
foreclosure of the liens hereby  created.  Borrower shall not have or assert any
right under any statute or rule of law  pertaining to the  marshaling of assets,
sale in inverse  order of  alienation,  the  exemption  of  homestead,  or other
matters whatever to defeat, reduce, or affect the right of Beneficiary under the
terms of this Deed of Trust to a sale of the  Properties  for the  collection of
the Indebtedness  without any prior or different  resort for collection,  or the
right of  Beneficiary  under the terms of this Deed of Trust to the  payment  of
such indebtedness out of the proceeds of sale or the Properties in preference to
every other claimant whatever.  If any law referred to in this paragraph and now
in force,  of which  Borrower or  Borrower's  successors  and assigns might take
advantage despite this paragraph,  shall hereafter be repealed or cease to be in
force,  such law shall not  thereafter be deemed to preclude the  application of
this paragraph.

     4.6 The  Beneficiary  shall have the right to become the  purchaser  at any
sale of the  Properties,  and the  Beneficiary  shall  have the  right to credit
against the amount of the bid made therefor, the amount of Indebtedness then due
and owing.  The  Beneficiary  upon any such purchase shall acquire good title to
the Properties so purchased,  free from the lien of this Deed of Trust, and free
of  all  rights  of  redemption  in  the  Borrower.  Recitals  contained  in any
conveyance made to any purchaser at any sale made hereunder shall  presumptively
establish  the truth and  accuracy of the  matters  therein  stated,  including,
without  limiting the  generality of the  foregoing,  non-payment  of the unpaid
principal  sum of,  and the  interest  accrued  on,  the Note after the same has
become due and payable,  and the conduct of the sale in the manner  provided for
herein;  and the Borrower  does hereby  ratify and confirm any and all acts that
the  Beneficiary  or its successors may lawfully do in the premises by virtue of
the terms and conditions hereof to the full extent permitted by applicable law.

     4.7 Any sale or sales of the Properties  shall operate to divest all right,
title, interest, claim, and demand whatsoever either at law or in equity, of the
Borrower  of, in, and to the  premises  and the  property  sold,  and shall be a
perpetual  bar,  both  at law  and in  equity,  against  the  Borrower,  and the
Borrower's  successors  and against  any and all  persons  claiming or who shall
thereafter claim all or any part of the properties sold from,  through, or under
the  Borrower,  or the  Borrower's  successors  and assigns.  Nevertheless,  the
Borrower,  if requested by the Beneficiary to do so, shall join in the execution
and  delivery  of all proper  conveyances,  assignments,  and  transfers  of the
properties sold.

     4.8 Upon the  occurrence  of an Event of  Default,  and in  addition to all
other rights herein  conferred upon the  Beneficiary,  the  Beneficiary  (or any
person, firm, or corporation designated by the Beneficiary) shall have the right
and power to the full  extent  permitted  by  applicable  law,  but shall not be
obligated,  to enter upon and take possession of any of the  Properties,  and to
exclude the Borrower and the Borrower's  agents, or servants,  wholly therefrom,
and to hold, use,  administer,  manage,  and operate the same to the extent that
the  Borrower  shall be at the time  entitled  and in its place and  stead.  The
Beneficiary,  or any person, firm, or corporation designated by the Beneficiary,
may operate the same without any  liability to the Borrower in  connection  with
such  operations,  except  to  use  ordinary  care  in  the  operation  of  said
properties,  and the Beneficiary or any person, firm, or corporation  designated
by it,  shall have the right to  collect,  receive,  and  receipt for all carbon
dioxide  produced  and sold  from said  properties,  to make  repairs,  purchase
machinery and equipment,  conduct work-over operations,  drill additional wells,
and to execute every power, right, and privilege of the Borrower with respect to
the Properties. All costs, expenses, and liabilities of every character incurred
by  the  Beneficiary  in  managing,  operating,   maintaining,   protecting,  or
preserving such properties,  respectively,  shall constitute a demand obligation
owing by the Borrower to the  Beneficiary  and shall bear interest from the date
of  expenditure  until paid at the same rate as is provided for in the Notes for
interest on past due principal,  all of which shall  constitute a portion of the
Indebtedness,  and  shall be  secured  by this  Deed of Trust  and by any  other
instrument securing the Indebtedness.

     4.9 If any statute now  applicable  to the  Properties  shall  hereafter be
amended to provide a different  procedure for the sale of real property  under a
Deed of Trust, the Trustee may, in its sole discretion,  if same be permitted by
applicable law, follow the procedure set forth herein or that prescribed in such
statute, as amended.

     4.10 The rights and remedies hereinabove expressly conferred are cumulative
of all other rights and remedies herein,  or by law or in equity  provided,  and
shall not be deemed  to  deprive  Beneficiary  of any other  legal or  equitable
rights or remedies, by judicial proceedings or otherwise, appropriate to enforce
the  conditions,  covenants,  and  terms  of  this  Deed  of  Trust  and  of the
Indebtedness and the employment of any remedy hereunder, or otherwise, shall not
prevent the concurrent or subsequent  employment of any other appropriate remedy
or remedies.

                                   ARTICLE 5

                            ASSIGNMENT OF PRODUCTION

     5.1 In order  further to secure the payment of the  Indebtedness,  Borrower
does hereby GRANT, BARGAIN, SELL, TRANSFER, ASSIGN, SET OVER and CONVEY unto and
in favor of the  Trustee,  in trust,  all of the interest of the Borrower in the
carbon dioxide which may be produced from the Properties,  or allocated  thereto
pursuant to pooling or  unitization  of the leases  described  in Exhibit "A" or
otherwise,  together  with all  proceeds  derived  from the sale of such  carbon
dioxide  on and after the date of the  execution  and  delivery  of this Deed of
Trust.

     5.2  The  foregoing  assignment  is  made  upon  the  following  terms  and
provisions:

     (a) The  Beneficiary  shall  have the right,  exercisable  only at any time
after the  occurrence  of an Event of Default,  to give  written or  telegraphic
notice to all of the  parties  producing,  purchasing,  taking,  possessing,  or
receiving any carbon dioxide produced or to be produced from or allocated to the
Properties,  or having in their possession any such carbon dioxide  belonging to
Borrower  or such  proceeds  for which  they or others  are  accountable  to the
Beneficiary  by virtue of the  provisions  hereof,  to hold and  dispose of such
carbon  dioxide for the account of the  Beneficiary  and to make payment of such
proceeds direct to the Beneficiary at its principal office,  and the Beneficiary
shall thereafter receive,  collect,  and retain, as part of the Properties,  all
such  carbon  dioxide,   all  for  the  benefit  and  further  security  of  the
Indebtedness.

     (b) All parties producing,  purchasing, taking, possessing,  processing, or
receiving any such carbon dioxide, or having in their possession any such carbon
dioxide  or such  proceeds  for which  they or  others  are  accountable  to the
Beneficiary by virtue of the provisions  hereof,  are authorized and directed by
the Borrower,  upon receipt of notice by the  Beneficiary  given pursuant to the
above  paragraph  6.2(a) to treat and regard the Beneficiary as the assignee and
transferee  of the  Borrower and entitled in its place and stead to receive such
carbon  dioxide and  proceeds;  and such parties and each of them shall be fully
protected in so treating and  regarding  the  Beneficiary  and shall be under no
obligation to see to the  application  by the  Beneficiary  of any such proceeds
received  by  it.  Without  in  any  way  limiting  the   effectiveness  of  the
authorization  and  direction in the next  preceding  sentence,  if the Borrower
shall receive any such proceeds  under which this Section  6.2(b) are receivable
by the  Beneficiary,  Borrower  will hold the same in trust and will  remit such
proceeds,  or  cause  such  proceeds  to  be  remitted,   immediately,   to  the
Beneficiary.

     (c)  Without  limiting  the  foregoing  provisions  of this  Assignment  of
Production,  the Borrower  stipulates  that this  Assignment  of  Production  is
intended to grant to the Beneficiary a security interest in Borrower's  interest
in the carbon dioxide to be extracted from or  attributable  to the  Properties,
and in and to the proceeds resulting from the sale thereof at the wellhead.

     5.3 The Borrower  covenants  and agrees and  undertakes  hereby,  after the
Beneficiary  shall have so requested in accordance  with this Deed of Trust,  to
cause all pipeline  companies or other purchasers of the carbon dioxide produced
from the Properties to pay promptly to the Beneficiary at its principal  office,
the  Borrower's  interest in the  proceeds  derived  from the sale  thereof,  in
accordance  with  the  terms  of this  assignment,  and  forthwith  to  execute,
acknowledge,  and deliver to said pipeline  companies and other  purchasers such
further and proper division  orders,  transfer orders,  certificates,  and other
documents as may be necessary or proper to effect the intent of these  presents;
and the  Beneficiary  shall not be required at any time,  as a condition  to its
right to obtain the  proceeds  of such  carbon  dioxide,  to  warrant  its title
thereto,  or  to  make  any  guaranty  whatsoever.   In  addition,  and  without
limitation, the Borrower covenants and agrees, and undertakes hereby, to provide
to the  Beneficiary  the name and  address  of every  pipeline  company or other
purchaser of the carbon dioxide and other minerals  produced from the Properties
when determined,  together with a copy of the applicable  sales  contracts.  All
expenses incurred by the Beneficiary in the collection of said proceeds shall be
repaid  promptly by the  Borrower;  and prior to such  repayment,  such expenses
shall be a part of the indebtedness secured hereby.

     5.4 Without  limitation  upon any of the  foregoing,  the  Borrower  hereby
designates and appoints the  Beneficiary as the Borrower's true and lawful agent
and attorney-in-fact  (with full power of substitution,  either generally or for
such periods or purposes as the  Beneficiary  may from time to time  prescribe),
with  full  power  and  authority,  for and on  behalf of and in the name of the
Borrower,  to  execute,  acknowledge,  and  deliver  all such  division  orders,
transfer orders,  certificates,  and other documents of every nature,  with such
provisions  as may from time to time,  in the  opinion  of the  Beneficiary,  be
necessary  or  proper  to effect  the  intent  and  purposes  of the  assignment
contained in this Section 5 and the Borrower shall be bound thereby as fully and
effectively  as if the  Borrower  had  personally  executed,  acknowledged,  and
delivered  any of the  foregoing  certificates  or  documents.  The  powers  and
authorities  herein  conferred  on  the  Beneficiary  may  be  exercised  by the
Beneficiary through any person who, at the time of exercise, is the president or
a vice  president  of the  Beneficiary,  or who  holds a similar  position  with
Beneficiary  or with  Beneficiary's  authorized  representative.  The  power  of
attorney  conferred by this paragraph is granted for valuable  consideration and
coupled with an interest and is irrevocable so long as the Indebtedness,  or any
portion thereof,  shall remain unpaid. All persons dealing with the Beneficiary,
or any  substitute,  shall  be  fully  protected  in  treating  the  powers  and
authorities  conferred  herein as  continuing  in full  force and  effect  until
advised by the Beneficiary that the Indebtedness is fully and finally paid.

     5.5 The  Beneficiary  shall  never be under any  obligation  to enforce the
collection of the funds  assigned to it  hereunder,  nor shall it ever be liable
for failure to exercise  diligence in the collection of such funds, but it shall
only be accountable for the sums that it shall actually receive.

     5.6  Should  any  pipeline  company  or other  purchaser  now or  hereafter
purchasing said  production fail to make payment  promptly to Beneficiary of the
proceeds  derived  from the sale  thereof,  Beneficiary  shall have the right to
change the  connection  of any such pipeline  company,  or other  purchaser,  to
purchase and take such  production,  without  liability on Beneficiary in making
such selection,  so long as ordinary care is used in respect thereof; and should
Borrower,  its heirs, personal  representatives,  and assigns fail to consent to
such connection, Beneficiary may accelerate the maturity of the Indebtedness.

     5.7 The proceeds accruing to the Properties, received by Beneficiary, shall
be applied by it when so received  toward  payment of the  Indebtedness,  as the
Beneficiary in its sole discretion deems appropriate.

     5.8  Notwithstanding  such  provision for  application  of proceeds,  it is
agreed that  Beneficiary  shall have the right,  at its  election,  from time to
time,  to apply any portion or all of said proceeds to the payment of any of the
taxes levied and assessed  against the Properties,  insurance  premiums,  liens,
bills for labor and material  furnished for use upon the Properties,  costs, and
expenses,  including  attorneys'  fees incurred by Beneficiary in the defense of
any action affecting the title to the Properties,  or the production  therefrom,
or any judgment  rendered against  Beneficiary upon any claim arising out of the
receipt,  or  application  in accordance  herewith,  of any such proceeds in the
event Borrower should fail to make such payments, or any of them, promptly after
demand made by Beneficiary  upon Borrower so to do.  Beneficiary  shall have the
right, at its election,  to release or deliver to Borrower all or any portion of
such  proceeds,  received by it, to the end that Borrower may receive funds with
which to pay for the operating,  equipping, and developing of the Properties, or
any well or wells thereon.  No funds so released or paid to Borrower  shall,  in
any event, be considered to have been applied upon the Indebtedness.

     5.9 The  rights of the  Beneficiary  with  respect  to this  assignment  of
production are cumulative of, and shall not limit, any other titles,  rights, or
remedies of the Beneficiary created by this instrument, or by law, and no action
taken by the Beneficiary to enforce this  assignment of production  shall affect
or be  affected  by any  other  action  the  Beneficiary  may  take  under  this
instrument or pursuant to any law or judgment.

                                   ARTICLE 6

                   SECURITY AGREEMENT AND FINANCING STATEMENT

     6.1 This Deed of Trust shall constitute a security agreement and shall also
constitute  and  may  be  filed  as  a  financing   statement  under  applicable
codifications  of the Uniform  Commercial  Code  (Colorado).  In addition to all
other rights and remedies  available to the Beneficiary  upon any default of the
Borrower,  the Beneficiary shall, upon any default,  be entitled to exercise any
one or more  remedies  granted to a secured  party on default  under the Uniform
Commercial Code (Colorado). This security agreement (and financing statement, if
applicable) covers and extends to all proceeds of collateral.

     6.2  Borrower  hereby  grant to  Beneficiary  a  security  interest  in all
personal  property and fixtures  constituting a part of the Properties  (whether
same are now located  thereon or  subsequently  acquired and used or obtained in
connection therewith).

     6.3 The fact that the proceeds from the sale of production  attributable to
the  Properties  are  included  as part of the  collateral  under this  security
agreement is not intended to limit,  supersede,  or negate,  in any manner,  the
Assignment of Production set forth above.

     6.4 Borrower represent and warrant that no financing statement covering the
Properties,  or any part thereof, has been filed with any filing officer, and no
other security  interest has attached or been perfected in the said  Properties,
or any part thereof.

     6.5 Certain of the Properties  are or are to become,  fixtures on the lands
and/or leases described in Exhibit "A."

     6.6 The  minerals  and the like  (including  carbon  dioxide)  or  accounts
produced  from the  Properties  will be  financed  at the  wellhead of the wells
located on the lands and/or leases  described in Exhibit "A." This Deed of Trust
shall be  effective  as a  financing  statement  covering  minerals  or the like
(including oil and gas) and accounts from the  Properties  subject to Subsection
(5) of Section 9.103.1 of the Uniform Commercial Code.

     6.7 This  instrument may be presented to a filing officer under the Uniform
Commercial  Code  (Colorado) to be filed of record as a  non-standard  financing
statement covering all personal property of any kind or character defined in and
subject to the Uniform Commercial Code (Colorado),  including carbon dioxide and
other  minerals  and  fixtures.  This  instrument  is to be filed of record as a
financing  statement in the real estate records.  The Beneficiary shall have the
right  at any  time  to  file  a  manually  executed  counterpart  or a  carbon,
photographic  or  other  reproduction  of this  Deed  of  Trust  as a  financing
statement  in either the  central or the local UCC  records of any  jurisdiction
wherein the Properties are located,  but the failure of the Beneficiary to do so
shall not impair (i) the effectiveness of this Deed of Trust as both a financing
statement  covering  carbon  dioxide  and  accounts  and as a fixture  filing as
permitted by Section 9.402 of the Uniform  Commercial Code, or (ii) the validity
and enforceability of this Deed of Trust in any respect.  For purposes of filing
this Deed of Trust as a financing  statement,  the  addresses  for  Borrower and
Beneficiary (Secured Party) are as follows:

         Debtor
            (Borrower):             The Beard Company
                                    Enterprise Plaza, Suite 320
                                    5600 N. May Avenue
                                    Oklahoma City, OK  73112

         Secured Party
            (Beneficiary):          McElmo Dome Nominee, LLC
                                    Enterprise Plaza, Suite 320
                                    5600 N. May Avenue
                                    Oklahoma City, OK  73112

                                   ARTICLE 7

                            MISCELLANEOUS PROVISIONS

     7.1 In the event that any one or more of the  provisions  contained in this
instrument shall be invalid,  illegal, or unenforceable in any respect under any
law, the validity,  legality,  and  enforceability  of the remaining  provisions
contained herein shall not in any way be affected or impaired thereby.

     7.2 This  instrument  shall be governed by and construed in accordance with
the laws of the State of Colorado.

     7.3 This Deed of Trust is executed in multiple original  counterparts,  all
of which are identical and constitute but one and the same instrument.

     7.4 All terms, conditions,  covenants,  warranties and agreements contained
herein  shall be binding  upon and inure to the  benefit of the  successors  and
assigns of Borrower,  and shall be deemed and construed to be covenants  running
with the estate or interest in the land, and all said provisions  shall likewise
inure to the benefit of and be binding  upon  Beneficiary,  its  successors  and
assigns.

     7.5 No failure of the Beneficiary to declare any default or to exercise any
right or remedy herein  provided in any one or more  instances or for any period
of time, and no  acquiescence  in or acceptance by the  Beneficiary of any later
defective notice or performance hereunder, shall be deemed a waiver or agreement
to modify any  provision  hereof.  The  Beneficiary  shall at all times have the
right,  notwithstanding any such prior acquiescence or forbearance,  without any
prior notice or demand, to require strict performance of each and every term and
provision hereof. At any time when any Event of Default is continuing hereafter,
the Beneficiary may, without any prior notice to the Borrower except such notice
as may be  herein  otherwise  required,  exercise  any  right or  remedy  of the
Beneficiary  arising by reason of such  default,  notwithstanding  the length of
time such Event of Default has been continuing, or the occurrence in the past of
similar events, or other Events of Default for which no remedy has been invoked.

     7.6 The liens  provided  for herein  shall not affect or be affected by any
other  security  or  guaranty  now or  hereafter  existing  with  respect to the
Indebtedness,  nor shall  they be  affected  by the  release  of any such  other
security or guaranty.

     7.7 Each and every covenant herein contained shall be performed and kept by
the Borrower  solely at the  Borrower's  expense.  If the Borrower shall fail to
perform or keep any of the covenants of whatsoever  kind or nature  contained in
this instrument,  the Beneficiary or any receiver  appointed  hereunder may, but
shall not be obligated to, make  advances to perform the same on the  Borrower's
behalf,  and the  Borrower  hereby  agree to repay  such  sum upon  demand  plus
interest  at the rate of  interest  set  forth in the Notes or, in the event any
other Notes evidencing such indebtedness  exists, at the interest rate set forth
therein.  No such  advance  shall be deemed to  relieve  the  Borrower  from any
default hereunder.

     7.8 Renewals, extensions, modifications, and amendments of the Indebtedness
may be given at any time, and  amendments may be made to agreements  relating to
any part of such Indebtedness or the Properties, and the Beneficiary may take or
may now hold other security for the Indebtedness without notice to or consent of
the Borrower.

     7.9 This instrument  shall be deemed to be and may be enforced from time to
time as an  assignment,  real  estate  deed of  trust,  security  agreement,  or
financing statement, and from time to time as any one or more thereof.

     7.10 In the event of a conflict  between the terms and  provisions  of this
instrument  and the terms and  provisions  of the Notes,  the terms of the Notes
shall control.

     7.11 The Unitrust  Note  evidences the unpaid  balance of the  indebtedness
secured by the 2003 Deed of Trust,  and  Beneficiary  acknowledges  and confirms
that  other  than  the   indebtedness   evidenced  by  the  Unitrust  Note,  all
indebtedness  secured by the 2003 Deed of Trust has been paid in full.  The lien
created by the 2003 Deed of Trust, to the extent of the  indebtedness  evidenced
by the Unitrust Note , is hereby  acknowledged by the Borrower to be a valid and
subsisting  lien  against the  properties  described  therein,  and such lien is
hereby renewed and extended to secure payment of all obligations secured by this
Deed of Trust.

[This space is left intentionally blank. The next page is the signature page.]

     IN WITNESS  WHEREOF,  the Borrower and the  Beneficiary  have executed this
Deed of Trust as of the day and year first above written.

                                    BORROWER:

                                      THE BEARD COMPANY an Oklahoma corporation

ATTEST:

By   /s/ Rebecca G. Witcher           By  /s/ Herb Mee, Jr.
     Rebecca G. Witcher, Secretary        Herb Mee, Jr., President

                                  BENEFICIARY:

                                  MCELMO DOME NOMINEE, LLC, an Oklahoma limited
                                  liability company

                                  By   /s/ William Beard
                                       William Beard, Member

                                  By   Boatright Family L.L.C.,  an Oklahoma
                                       limited liability company, Member

                                       By /s/ Peter Boatright
                                          Peter Boatright, Manager

STATE OF OKLAHOMA     ss.
                      ss.
COUNTY OF OKLAHOMA    ss.

     BEFORE  ME, a notary  public in and for said  county and state on this 21st
day of May,  2004,  personally  appeared  Herb Mee,  Jr.,  known to me to be the
identical  person  who  subscribed  his  name  to the  foregoing  instrument  as
President of The Beard Company, and acknowledged to me that he executed the same
as his free and  voluntary  act and deed,  and as the free and voluntary act and
deed of such corporation, for the uses and purposes therein set forth.

     IN WITNESS WHEREOF,  I have hereunto set my official  signature and affixed
my notary seal the day and year first above written.

My Commission Expires:          /s/ Linda Shrum
10/30/06                        Notary Public, State of Oklahoma
                                Commission No.  02017703
(Seal)

STATE OF OKLAHOMA     ss.
                      ss.
COUNTY OF OKLAHOMA    ss.

     BEFORE  ME, a notary  public in and for said  county and state on this 21st
day of May,  2004,  personally  appeared  William  Beard,  known to me to be the
identical person who subscribed his name to the foregoing instrument as a Member
of  McElmo  Dome  Nominee  LLC,  an  Oklahoma  limited  liability  company,  and
acknowledged  to me that he executed the same as his free and  voluntary act and
deed,  and as the free and  voluntary act and deed of such  corporation  for the
uses and purposes therein set forth.

     IN WITNESS WHEREOF,  I have hereunto set my official  signature and affixed
my notary seal the day and year first above written.

My Commission Expires:          /s/ Linda Shrum
10/30/06                        Notary Public, State of Oklahoma
                                Commission No.  02017703
(Seal)

STATE OF OKLAHOMA      ss.
                       ss.
COUNTY OF OKLAHOMA     ss.

     BEFORE  ME, a notary  public in and for said  county and state on this 21st
day of May, 2004,  personally  appeared Peter  Boatright,  known to me to be the
identical  person  who  subscribed  his name to the  foregoing  instrument  as a
Manager of Boatright  Family  L.L.C,  as a Member of McElmo Dome Nominee LLC, an
Oklahoma limited liability company,  and acknowledged to me that he executed the
same as his free and voluntary  act and deed,  and as the free and voluntary act
and deed of such corporation for the uses and purposes therein set forth.

     IN WITNESS WHEREOF,  I have hereunto set my official  signature and affixed
my notary seal the day and year first above written.

My Commission Expires:          /s/ Linda Shrum
10/30/06                        Notary Public, State of Oklahoma
                                Commission No.  02017703
(Seal)

                                    EXHIBIT A

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