Exhibit 99.4
SUBORDINATION AGREEMENT AND
RELEASE
This Subordination Agreement (the
“Subordination Agreement”) is made as of the 8
th day of June, 2007 (“Effective Date”), by
and among William M. Beard and Lu Beard, as Trustees of The William
M. Beard and Lu Beard 1988 Charitable Unitrust
(“Unitrust”), Boatright Family, L.L.C.
(“Boatright”), and McElmo Dome Nominee, LLC, a limited
liability company (“Nominee”).
Whereas, The Beard Company (the
“Company”) has executed and delivered to Unitrust that
certain Promissory Note dated March 26, 2004 in the original
principal amount of $2,785,000 (the “Prior Unitrust
Note”), upon which, as of the Effective Date, the unpaid
principal balance is $2,782,900.59 and the accrued unpaid interest
is $514,103.64; and
Whereas, the Company has executed and delivered to
Boatright the Company’s 12% Convertible Subordinated Note due
August 31, 2009, in the principal amount of $390,000.00 (the
“Company Boatright Note”) and upon which, as of the
Effective Date, the accrued and unpaid interest is $12,821.92;
and
Whereas, in consideration of such loans and to
secure payment of the loans evidenced by the Prior Unitrust Note
and the Company Boatright Note (collectively, the “Prior
Notes”) the Company has executed and delivered to the public
trustees of Montezuma County and Dolores County, Colorado, that
certain Amended and Restated Deed of Trust, Assignment of
Production, Security Agreement, and Financing Statement, dated as
of July 22, 2005 (the “2005 Deed of Trust”), covering
certain oil, gas, and mineral interests (collectively, the
“Collateral”), for the benefit of the Nominee;
and
Whereas, Unitrust, Boatright, and Nominee have
previously entered into a Subordination and Nominee Agreement dated
July 22, 2005 (the “2005 Nominee Agreement”) under
which (i) the Nominee agreed to act as agent and nominee on behalf
of Unitrust, Boatright, and such other parties under the 2005 Deed
of Trust, and (ii) the parties have agreed to certain priorities
among the parties with respect to proceeds of the Collateral;
and
Whereas, the Company has previously executed and
delivered to Boatright that certain promissory note dated May 22,
2006, in the principal amount of $200,000 (the “2006
Note”), and to secure payment of the 2006 Note the Company
has executed and delivered to the public trustees of Montezuma
County and Dolores County, Colorado, that certain Deed of Trust,
Assignment of Production, Security Agreement, and Financing
Statement, dated as of May 22, 2006 (the “2006 Deed of
Trust”), covering the Collateral, for the benefit of
Boatright, recorded at Book 0348 Page 259 of the real estate
records of Dolores County, Colorado and under file stamp number
540874 of the real estate records of Montezuma County, Colorado;
and
Whereas, paragraph (b) of Article 1 of the 2006 Deed
of Trust was inadvertently included, and incorrectly states that
the 2006 Deed of Trust was given, in part, to secure payment of the
“Unitrust Note”, which term is not defined in the 2006
Deed of Trust; and
Whereas, the Company, Unitrust, Boatright and
Nominee have previously entered into a Subordination Agreement
dated May 22, 2006 (the “2006 Subordination
Agreement”), providing for the subordination of the Prior
Unitrust Note and the Company Boatright Note to the 2006 Note and
for the subordination of the 2005 Deed of Trust to the 2006 Deed of
Trust; and
Whereas, the Company desires to borrow certain
additional funds and desires that Unitrust and Boatright
subordinate their interests in the 2005 Deed of Trust to the 2007
Deed of Trust (hereafter defined), and Boatright and Unitrust have
agreed to such subordination, subject to the terms and conditions
of this Subordination Agreement; and
Whereas, to evidence such additional loan, the
Company has executed and delivered to First Fidelity Bank, N.A.
(“Lender”) that certain promissory note dated June 8,
2007, in the principal amount of $1,500,000 (the “2007
Note”), and to secure payment of the 2007 Note the Company
has executed and delivered to the public trustees of Montezuma
County and Dolores County, Colorado, that certain Deed of Trust,
Assignment of Production, Security Agreement, and Financing
Statement, dated as of June 8, 2007 (the “2007 Deed of
Trust”), covering the Collateral, for the benefit of Lender.
The 2007 Note and the 2007 Deed of Trust are attached hereto as
Exhibits “A
