FORM OF DEBENTURE
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD
UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENT OF THE ACT IS AVAILABLE. THIS
SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
No. 91 $ U.S.
TRANS ENERGY, INC.
8% CONVERTIBLE SECURED DEBENTURE DUE MARCH 31, 1999
THIS DEBENTURE is one of a duly authorized issue of Debentures
of TRANS ENERGY, INC., a corporation duly organized and existing
under the laws of the State of Nevada (the "Company") designated as
its 8% Secured Convertible Debentures Due March 31, 1999, in an
aggregate principal amount not exceeding $4,850,000.00 U.S.
FOR VALUE RECEIVED, the Company promises to pay to
_______________________, the registered holder hereof (the
"Holder"), the principal sum of __________________ Dollars
($_____________ U.S.), on March 31, 1999, (the "Maturity Date") and
to pay interest on the principal sum outstanding from time to time
in arrears on the Maturity Date, at the rate of 8% per annum
accruing from the date of initial issuance. Accrual of interest
shall commence on the first such business day to occur after the
date hereof until payment in full of the principal sum has been
made or duly provided for. All accrued and unpaid interest shall
bear interest at the same rate as the due date of the interest
payment until paid. The interest so payable will be paid on the
Maturity Date to the person in whose name this Debenture (or one or
more predecessor Debentures) is registered on the records of the
Company regarding registration and transfers of the Debentures (the
"Debenture Register") on the tenth day prior to the Maturity Date;
provided, however, that the Company's obligation to a transferee of
this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions of
the Subscription and Security Agreement (the "Agreement") executed
by the original Holder. The principal of, and interest on, this
Debenture are payable in such coin or currency of the United States
of America as at the time of payment is legal tender for payment
of public and private debts, at the address last appearing on the
Debenture Register of the Company as designated in writing by the
Holder from time to time. The Company will pay the principal of
and interest upon this Debenture on the Maturity Date, less any
amounts required by law to be deducted, to the registered holder of
this Debenture reflected in the Debenture Register as of the tenth
day prior to the Maturity Date and addressed to such holder at the
last address appearing on the Debenture Register. The forwarding
of such check shall constitute a payment of interest hereunder and
shall satisfy and discharge the liability for principal and
interest on this Debenture in the extent of the sum represented by
such check plus any amounts so deducted unless such check is not
paid at par.
(continued on reverse)
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed by an officer thereunto duly authorized.
TRANS ENERGY INC.
Dated: June ____, 1998 By: __________________________
This Debenture is subject to the following additional
provisions:
1. The Debentures are issuable in denominations of Five
Thousand Dollars ($5,000 U.S.) and integral multiples thereof. The
Debentures are exchangeable for an equal aggregate principal amount
of Debentures of different authorized denominations, as requested
by the Holders surrendering the same. No service charge will be
made for such registration of transfer or exchange.
2. The Company shall be entitled to withhold from all
payments of principal of and interest on, this Debenture any
amounts required to be withheld under the applicable provisions of
the United States income tax laws or other applicable laws at the
time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be
transferred or exchanged only in compliance with the Securities Act
of 1933, as amended (the "Act") and upon receipt of an opinion of
counsel reasonably satisfactory to the Company. Prior to due
presentment for transfer of this Debenture, the Company and any
agent of the Company may treat the person in whose name this
Debenture is duly registered on the Company's Debenture Register as
the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Debenture
be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
4. The obligations of the Company under this Debenture,
including without limitation the obligation to convert under
Section 5 hereof and the payment of principal and interest on this
Debenture is secured by certain assets of the Company, as set forth
in the Agreement. The Holder of this Debenture is entitled to
exercise such rights upon the occurrence of an Event of Default (as
such terms is defined in the Agreement) described in the Agreement.
5. The Holder of this Debenture is entitled, at its
option, at any time, until maturity hereof to convert the principal
amount of this Debenture or any portion of the principal amount
hereof which is at least Ten Thousand Dollars ($10,000 U.S.) or, if
at the time of such election to convert the aggregate principal
amount of all Debentures registered to the Holder is less than Ten
Thousand Dollars ($10,000 U.S.), then the whole amount thereof,
into Shares of Common Stock of the Company at a conversion price
for each share of Common Stock equal to the lower of (a) seventy
percent (70%) of the Market Price of the Company's Common Stock
averaged over the five trading days prior to the date of
conversion, or (b) the Market Price on the issuance date of this
Debenture. For purposes of this Section 5, the Market Price shall
be the closing bid price of the Common Stock, as reported by the
National Association of Securities Dealers Inc. Automated Quotation
System or, in the event the Common Stock is listed on a stock
exchange, the fair market value per Share shall be the closing
price on the exchange, as reported in the Wall Street Journal.
Such conversion shall be effectuated by surrendering the Debentures
to be converted to the Company, at 000 Xxxxxx Xxxxxx, Xx. Xxxx'x,
Xxxx Xxxxxxxx 00000, facsimile (000) 000-0000 with the form of
conversion notice attached hereto as Exhibit A, executed by the
Holder of this Debenture evidencing such Holder's intention to
convert this Debenture or a specified portion (as above provided)
hereof, and accompanied, if such shares are to be issued in a name
other than Holder by proper assignment hereof in blank. Any
accrued and unpaid interest shall be payable, at the option of the
Company, in cash or in shares valued at the then effective
conversion price. No fractions of shares or scrip representing
fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share. The
date on which notice of conversion is given shall be deemed to be
the date on which the Holder has delivered this Debenture, with the
conversion notice duly executed, to the Company, or, if earlier,
the date set forth in such notice of conversion (if sent by
facsimile transmission) if this Debenture is received by the
Company within two business days' thereafter. The Company shall
deliver the Common Stock issuable upon conversion hereof to the
Holder (or its designee) by overnight courier received within three
business days of the date on which the notice of conversion is
given (the "Delivery Date"), otherwise the penalties described in
the Security and Subscription Agreement shall apply.
6. This Debenture and all other Debentures now or
hereafter issued of similar terms are direct obligations of the
Company. This Debenture ranks equally and ratably with all other
Debentures now or hereafter issued under the terms set forth
herein.
7. No recourse shall be had for the payment of the
principal of, or the interest on this Debenture, or for any claim
based hereon, or otherwise in respect hereof, against any
incorporator, shareholder, officer or director, as such, past,
present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof,
expressly waived and released.
8. The Holder of this Debenture, by acceptance hereof,
agrees that this Debenture is being acquired for investment and
that such Holder will not offer, sell or otherwise dispose of this
Debenture or the Shares of Common Stock issuable upon conversion
thereof except under circumstances which will not result in a
violation of the Act or any applicable state Blue Sky law or
similar laws relating to the sale of securities.
9. This Debenture shall be governed by and construed in
accordance with the laws of the State of Nevada, and shall be
further subject to the terms of the Agreement.
