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Exhibit 10.05
 
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
 
4¾% SECURED CONVERTIBLE DEBENTURE
 
Company:
 
Worthington Energy, Inc., a Nevada corporation
Company Address:
 
220 Montgomery St., #1094, San Francisco, CA 94104-3413
Closing Date:
 
April 30, 2012
Maturity Date:
 
April 30, 2014
Principal Amount:
 
$200,000

 
This 4¾% CONVERTIBLE DEBENTURE is duly authorized and validly issued by
Worthington Energy, Inc., a Nevada corporation, (the “Company”) to La Jolla Cove
Investors, Inc. or its registered assigns (the “Holder”), pursuant to the terms
of a Securities Purchase Agreement dated April 30, 2012 between the Company and
the Holder (the “Securities Purchase Agreement”). ”). Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement.

FOR VALUE RECEIVED, the Company promises to the Holder the principal sum of
$200,000, subject to adjustment as provided herein (the “Principal Amount”) on
April 30, 2014 (the “Maturity Date”) or such earlier date as this Debenture is
required or permitted to be repaid as provided hereunder, and to pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of
this Debenture at the rate of four and three quarters percent (4¾%) per annum
(the “Interest Rate”), all in accordance with the terms and conditions contained
in this Debenture.  Interest shall accrue from the date hereof and be payable on
a monthly basis, commencing on the 15th day of each month following the month of
issuance of this Debenture, with the final payment to be made on the Maturity
Date (each, an “Interest Payment Due Date”). Interest shall be calculated on the
basis of a year of 365 or 366 days, as the case may be, for the actual number of
days (including the first day but excluding the last day) occurring in the
period for which such interest is payable.  Payment of interest on this
Debenture shall be in cash or, at the option of the Holder, in shares of Common
Stock of the Company valued at the then applicable Conversion Price (as defined
below).  At the Maturity Date, the Company shall pay in cash the full
outstanding Principal Amount of this Debenture, together with all accrued and
unpaid interest.  This Debenture may not be prepaid without the written consent
of the Holder.  This Debenture is subject to the following additional
provisions:

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ARTICLE 1
DEFINITIONS
 
1.1           Definitions.  Capitalized terms used but not defined in this
Debenture shall have the meaning ascribed in the Securities Purchase
Agreement.  The terms defined in this Article whenever used in this Debenture
have the following meanings:
 
“Alternate Consideration” shall have the meaning set forth in Section 3.1.
 
 “Bankruptcy Code” means the United States Bankruptcy Code of 1986, as amended
(11 U.S.C. §§ 101 et. seq.).
 
“Bankruptcy Event” means any of the following events: (a) the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Significant Subsidiary thereof; (b) there is commenced against
the Company or any Significant Subsidiary thereof any such case or proceeding
that is not dismissed within 60 days after commencement; (c) the Company or any
Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order
of relief or other order approving any such case or proceeding is entered; (d)
the Company or any Significant Subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment; (e) the
Company or any Significant Subsidiary thereof makes a general assignment for the
benefit of creditors; (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.
 
“Beneficial Ownership Limitation”  shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.
 
“Capital Shares” means the Common Stock and any other shares of any other class
or series of capital stock, whether now or hereafter authorized and however
designated, which have the right to participate in the distribution of earnings
and assets (upon dissolution, liquidation or winding-up) of the Company.
 
“Closing Date” means the closing date set forth at the beginning of this
Debenture.

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“Common Stock Issued at Conversion”, when used with reference to the securities
deliverable upon conversion of this Debenture, means all Common Stock or
securities of any other class or series into which this Debenture hereafter
shall have been changed or substituted, whether now or hereafter created and
however designated.
 
 “Conversion Date” means the date specified in accordance with the provisions of
Section 2.2.
 
“Conversion Notice” means a written notice of conversion substantially in the
form annexed hereto as Exhibit A.
 
“Conversion Price” means the applicable price for the conversion of this
Debenture as set forth in 2.1.
 
“Current Market Price” means, for any date, the price determined by the first of
the following clauses that applies: (a) if the Common Stock is then listed or
quoted on a national securities exchange, the VWAP of the Common Stock for such
date (or the nearest preceding date) on the principal exchange on which the
Common Stock is then listed or quoted for trading as reported as reported by
Bloomberg L.P. at 4:15 p.m. (New York City time); (b)  if the Common Stock is
traded on the OTC Bulletin Board, the VWAP of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin Board as reported by Bloomberg
L.P. at 4:15 p.m. (New York City time); (c) if the Common Stock is not then
quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the last reported VWAP of the Common Stock so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company.
 
“Debenture” means this 4¾% Convertible Debenture issued by the Company or
debenture issue in exchange or replacement.
 
“Discount Multiplier” has the meaning set forth in Section 2.1(a).
 
“Event of Default” has the meaning set forth in Section 5.1.
 
“Excluded Securities” means (a) securities issued by the Company pursuant to a
stock option or equity incentive plan that has been approved by the Company’s
Board of Directors and provides for the grant of the Company’s securities solely
to any employee, officer,  director or consultant to the Company in exchange for
services provided to the Company, (b) shares of Common Stock issued by the
Company upon the conversion, exchange or exercise of any right, option,
obligation or security outstanding on the date prior to the Closing Date,
provided that the terms of such right, option, obligation or security are not
amended or otherwise modified on or after the Closing Date, and provided that
the conversion price, exchange price, exercise price or other purchase price is
not reduced, adjusted or otherwise modified and the number of shares of Common
Stock issued or issuable is not increased (whether by operation of, or in
accordance with, the relevant governing documents or otherwise) on or after the
Closing Date, (c) securities issued in connection with any acquisition, whether
through an acquisition of stock, assets or technologies, leasing arrangement or
any other transaction the primary purpose of which is not to raise equity
capital, and (d) the shares of Common Stock issued upon conversion of this
Debenture.
 
“Floor Price” has the meaning set forth in Section 2.1(c).
 

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“Holder” has the meaning set forth in the first paragraph of this Debenture.
 
“Interest Payment Due Date” has the meaning set forth in the second paragraph of
this Debenture.
 
“Interest Rate” means the interest rate as defined in the second paragraph of
this Debenture.
 
“Maturity Date” means the maturity date set forth in the second paragraph of
this Debenture.
 
“Outstanding” when used with reference to Common Stock or Capital Shares means,
on any date of determination, all issued and outstanding Common Stock or Capital
Shares, and includes all such Common Stock or Capital Shares issuable in respect
of outstanding scrip or any certificates representing fractional interests in
such Common Stock or Capital Shares; provided, however, that any such Common
Stock or Capital Shares directly or indirectly owned or held by or for the
account of the Company or any Subsidiary of the Company shall not be deemed
“Outstanding” for purposes hereof.
 
“Principal Amount” has the meaning set forth in the second paragraph of this
Debenture.
 
“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
national securities exchange, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the principal
exchange on which the Common Stock is then listed or quoted for trading as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time); (b)  if the Common Stock is traded on
the OTC Bulletin Board, the volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if
the Common Stock is not then quoted for trading on the OTC Bulletin Board and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
Pink Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (d) in all other cases, the fair market value of a
share of Common Stock as determined by an independent appraiser selected in good
faith by the Holder and reasonably acceptable to the Company.
 
All references to “cash” or “$” herein means the currency of the United States
of America.
 
ARTICLE 2
CONVERSION OF DEBENTURE
 
2.1           Conversion; Conversion Price
 
(a)           The Holder shall have the right to convert all or any portion of
the Principal Amount and any accrued interest outstanding under this Debenture
from time to time, into shares of Common Stock (calculated as to each such
conversion to the nearest 1/100th of a share), on any Business Day.
 

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(b)           The number of shares into which this Debenture can be converted is
equal to the dollar amount of this Debenture being converted, as reflected in
the applicable Conversion Notice, divided by the quotient of the Conversion
Price divided by 10, plus the Debenture amount being converted divided by the
Conversion Price.  The “Conversion Price” shall be equal to the lesser of (i)
$0.45, or (ii) 75% of the three lowest VWAPs during the twenty-one (21) Trading
Days prior to the date of the Conversion Notice (such percentage amount being
the “Discount Multiplier”).
 
(c)           If, on the date the Holder delivers a Conversion Notice, the
applicable Conversion Price is below $0.02 (the “Floor Price”), the Company
shall have the right, exercisable within two (2) Business Days after the
Company’s receipt of such Conversion Notice, to prepay that portion of the
Debenture that Holder elected to convert.  Any such prepayment shall be made in
an amount equal to one hundred twenty percent (120%) of the sum of (i) the
Principal Amount to be converted as specified in the applicable Conversion
Notice, plus (ii) any accrued and unpaid interest on such Principal Amount.  In
the event that the Company fails to make the prepayment within two (2) Business
Days after the Company’s receipt of such Conversion Notice, the Company shall no
longer have the right to prepay such portion of the Debenture and shall issue to
Holder the applicable Common Stock Issued at Conversion set forth in the
Conversion Notice under the terms of this Debenture.  In the event that the
Company elects to prepay that portion of the Debenture, Holder shall have the
right to withdraw its Conversion Notice.
 
2.2           Exercise of Conversion Privilege.  Holder shall exercise its
conversion rights any Business Day by emailing or telecopying an executed and
completed Conversion Notice to the Company.  The Conversion Notice shall specify
the date on which such conversion shall be effected (such date, the “Conversion
Date”).  If no Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is deemed
delivered hereunder.  Each date on which a Conversion Notice is emailed or
telecopied to the Company shall constitute a Conversion Date.  The Conversion
Notice also shall state the name or names (with addresses) of the persons who
are to become the holders of the Common Stock Issued at Conversion in connection
with such conversion.  To effect conversions hereunder, the Holder shall not be
required to physically surrender this Debenture to the Company unless the entire
Principal Amount of this Debenture, plus all accrued and unpaid interest
thereon, has been so converted. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Debenture in an amount equal
to the applicable conversion.  The Holder and the Company shall maintain records
showing the Principal Amount(s) converted and the date of such
conversion(s).  The Company may deliver an objection to any Notice of Conversion
within one Business Day of delivery of such Notice of Conversion.  In the event
of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder, and any assignee
by acceptance of this Debenture, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of this
Debenture, the unpaid and unconverted Principal Amount of this Debenture may be
less than the amount stated on the face hereof.
 

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2.3           Delivery of Common Stock.  The Company shall convert this
Debenture and issue the Common Stock Issued at Conversion in the manner provided
below, and all voting and other rights associated with the beneficial ownership
of the Common Stock Issued at Conversion shall vest with the Holder, effective
as of the Conversion Date at the time specified in the Conversion Notice.  As
promptly as practicable after the receipt of the Conversion Notice as aforesaid,
but in any event not more than three (3) Business Days after the Company’s
receipt of such Conversion Notice, the Company shall (a) issue the Common
Stock  Issued at Conversion in accordance with the provisions of this and (b)
cause to be mailed for delivery by overnight courier a certificate or
certificate(s) representing the number of shares of Common Stock to which the
Holder is entitled by virtue of such conversion and (y) cash, as provided in
Section 2.5, in respect of any fraction of a share of Common Stock deliverable
upon such conversion.  If the Common Stock is DWAC eligible, pursuant to the
terms of a Conversion Notice, Company will issue instructions to the transfer
agent accompanied by an opinion of counsel (if so required by Company’s transfer
agent), and, except as otherwise provided below, shall cause the transfer agent
to transmit the certificates representing the Conversion Shares to the Holder by
crediting the account of the Holder’s designated broker with the Depository
Trust Corporation (“DTC”) through its Deposit Withdrawal Agent Commission
(“DWAC”) system within three (3) business days after receipt by Company of the
Notice of Conversion (the “Delivery Date”). The Holder shall be treated for all
purposes as the beneficial holder of such shares of Common Stock, or, in the
case that Company delivers physical certificates as set forth above, the record
holder of such shares of Common Stock, unless the Holder provides Company
written instructions to the contrary. Notwithstanding the foregoing to the
contrary, Company or its transfer agent shall only be obligated to issue and
deliver the shares to the DTC on the Holder’s behalf via DWAC (or certificates
free of restrictive legends) if the registration statement providing for the
resale of the shares of Common Stock issuable upon the conversion of this Note
is effective.
 
2.4           Transfer Taxes.  Conversion of this Debenture shall be made
without charge to the Holder hereof for any documentary stamp or similar taxes
that may be payable in respect of the issue or delivery of such certificates,
provided that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate upon conversion in a name other than that of the Holder of this
Debenture so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
 
2.5           Fractional Shares.  No fractional shares or scrip representing
fractional shares of Common Stock shall be delivered upon conversion of this
Debenture.  Instead of any fractional share which otherwise would be delivered
upon conversion of this Debenture, the Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction multiplied by
the Current Market Price on the Conversion Date.  No cash payment of less than
$1.00 shall be required to be given unless specifically requested by the Holder.
 
2.6           Beneficial Ownership Limitation.  Notwithstanding the foregoing,
the Holder may not convert this Debenture to the extent that such conversion
would cause the Holder to exceed the Beneficial Ownership Limitation.  To the
extent that Holder delivers a Conversion Notice which would result in the
issuance of shares of Common Stock in excess of the Beneficial Ownership
Limitation, such Conversion Notice shall be deemed to provide for conversion of
only that portion of the Debenture as can be issued without exceeding the
Beneficial Ownership Limitation.
 

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2.7           Obligations Absolute.  The Conversion Notice shall constitute a
contract between the Holder and the Company, whereby the Holder shall be deemed
to subscribe for the number of shares of Common Stock which it will be entitled
to receive upon such conversion and, in payment and satisfaction of such
subscription, to surrender this Debenture and to release the Company from all
liability thereon (except if and to the extent that any Principal Amount thereof
remains unconverted).  The Company’s obligations to issue and deliver the Common
Stock upon conversion in accordance with the terms of this Debenture are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of such Conversion Shares.  If the Company fails for any reason to
deliver to the Holder such certificate or certificates pursuant to Section 2.3
by the third Trading Day after the Conversion Date, and if after such Share
Delivery Date the Holder is required by its brokerage firm to purchase (in an
open market transaction or otherwise), or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by such
Holder of the shares of Common Stock which the Holder was entitled to receive
upon the conversion, then the Company shall (A) pay in cash to the Holder (in
addition to any other remedies available to or elected by the Holder) the amount
by which (x) the Holder’s total purchase price (including any brokerage
commissions) for the Common Stock so purchased exceeds (y) the product of (1)
the aggregate number of shares of Common Stock that such Holder was entitled to
receive from the conversion at issue multiplied by (2) the actual sale price at
which the sell order giving rise to such purchase obligation was executed
(including any brokerage commissions) and (B) at the option of the Holder,
either reissue (if surrendered) this Debenture in a principal amount equal to
the principal amount of the attempted conversion or deliver to the Holder the
number of shares of Common Stock that would have been issued if the Company had
timely complied with its delivery requirements.  The Holder shall provide the
Company written notice indicating the amounts payable to the Holder and, upon
request of the Company, evidence of the amount of such loss.  Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
conversion of this Debenture as required pursuant to the terms hereof.
 
ARTICLE 3
RECLASSIFICATION AND ADJUSTMENTS
 
3.1           Reclassification.
 
(a)           In the event that (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one transaction or
a series of related transactions, (C) any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent conversion of this Debenture, the Holder shall have
the right to receive, for each share of Common Stock that would have been
issuable upon such conversion immediately prior to the occurrence of such
Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the “Alternate
Consideration”).
 

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(b)           For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Conversion Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration.  If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any conversion of this Debenture following such Fundamental
Transaction.  To the extent necessary to effectuate the foregoing provisions,
any successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new debenture consistent with the foregoing
provisions and evidencing the Holder’s right to convert such debenture into
Alternate Consideration.
 
(c)           In the even then the Holder of this Debenture shall have the right
thereafter, at its sole option, to (x) declare and Event of Default and require
the Company to prepay this Debenture as set forth in Section 5.1(i), (y) elect
receive the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Alternate
Consideration as is receivable upon or as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock into which the
outstanding portion of this Debenture may be converted at the Conversion Price
applicable immediately prior to such Fundamental Corporate Change, or (z)
require the Company, or such successor, resulting or purchasing corporation, as
the case may be, to, without benefit of any additional consideration therefor,
execute and deliver to the Holder a debenture with substantial identical rights,
privileges, powers, restrictions and other terms as this Debenture in an amount
equal to the amount outstanding under this Debenture immediately prior to such
Fundamental Transaction.  The foregoing provisions shall similarly apply to
successive Fundamental Transactions.
 
3.2           Adjustments to Floor Price.
 
(a)           Subdivision or Combination of Common Stock.  If the Company, at
any time while this Debenture is outstanding, shall (A) pay a stock dividend or
otherwise make a distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in shares of Common
Stock, (B) subdivide outstanding shares of Common Stock into a larger number of
shares, (C) combine (including by way of reverse stock split) outstanding shares
of Common Stock into a smaller number of shares, or (D) issue by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then the Floor Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
 

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(b)           Issuance of Capital Shares.  If the Company, at any time while
this Debenture is outstanding, issues or sells, any shares of Common Stock or
rights, warrants or options to subscribe for or purchase shares of Common Stock
(collectively, “Common Stock Equivalents”), excluding any Excluded Securities,
for a consideration per share less than the Floor Price, then immediately after
such sale or issuance the Floor Price then in effect shall be reduced to an
amount equal to 80% of the effective price at which the Common Stock was issued.
For purposes of determining the adjusted Floor Price under this Section, the
following shall be applicable:
 
(A)           Issuance of Equity Securities.  If the Company in any manner
grants or sells any Common Stock Equivalents and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such Common
Stock Equivalent is less than the Floor Price, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Common Stock Equivalent for
such price per share.  For purposes of this Section, the “lowest price per
share” for which one share of Common Stock is issuable upon the exercise of any
such Common Stock Equivalent shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock (x) upon granting or sale of the Common Stock
Equivalent, (y) upon exercise of the Common Stock Equivalent and (z) upon
conversion or exchange or exercise of such Common Stock Equivalent. No further
adjustment of the Floor Price shall be made upon the actual issuance of such
share of Common Stock upon the exercise or conversion of the Common Stock
Equivalent.
 
(B)           Change in Option Price or Rate of Conversion.  If the purchase
price provided for in any Common Stock Equivalent, the additional consideration,
if any, payable upon the issue, conversion, exchange or exercise of any Common
Stock Equivalent, or the rate at which any Common Stock Equivalent is
convertible into or exchangeable or exercisable for Common Stock changes at any
time, the Floor Price in effect at the time of such change shall be adjusted to
the Floor Price which would have been in effect at such time had such Common
Stock Equivalent provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section, if the terms of
any Common Stock Equivalent that was outstanding as of the Closing Date are
changed in the manner described in the immediately preceding sentence, then such
Common Stock Equivalent and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change. No adjustment shall be made if such adjustment would result
in an increase of the Floor Price then in effect.
 

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(C)           Calculation of Consideration Received.  If any Common Stock
Equivalent is issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Common Stock Equivalent by the parties
thereto, the Common Stock Equivalent will be deemed to have been issued for the
difference of (x) the aggregate fair market value of such Common Stock
Equivalent and other securities issued or sold in such integrated transaction,
less (y) the fair market value of the securities other than such Common Stock
Equivalent, issued or sold in such transaction and the other securities issued
or sold in such integrated transaction will be deemed to have been issued or
sold for the balance of the consideration received by the Company. If any Common
Stock or Common Stock Equivalents are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the gross amount raised by the Company; provided, however, that such gross
amount is not greater than 110% of the net amount received by the Company
therefor. If any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by the Company will be the fair value of such consideration.
The fair value of any consideration other than cash or securities will be
determined jointly by the Company and the Holder.
 
(D)           Record Date.  If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (x) to receive a dividend or
other distribution payable in Common Stock, or Capital Shares or (y) to
subscribe for or purchase Common Stock, Capital Shares, then such record date
will be deemed to be the date of the issue or sale of the Common Stock deemed to
have been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
 
(c)           Other Events.  If any event occurs of the type contemplated by the
provisions of this Section 3.2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Floor Price so as
to protect the rights of the Holder under this Debenture; provided that no such
adjustment will increase the Floor Price as otherwise determined pursuant to
this Section 3.2.
 
3.3           Notice of Certain Events.
 
(a)           Adjustment to Floor Price.  Whenever the Floor Price is adjusted
pursuant to any provision of Section 3.2, the Company shall promptly mail to the
Holder a notice setting forth the Floor Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
 
(b)           Notice to Allow Conversion by Holder.  If (A) the Company shall
declare a dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Company shall declare a special nonrecurring cash dividend on or
a redemption of the Common Stock, (C) the Company shall authorize the granting
to all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Debenture, and shall cause to be delivered to the Holder at its last address as
it shall appear upon the Debenture Register, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the
failure to deliver such notice or any defect therein or in the delivery thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to convert this Debenture during the
20-day period commencing on the date of such notice through the effective date
of the event triggering such notice.
 

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(c)           If at any time that this Debenture is outstanding: (i) the VWAP is
below $0.01(ii) the Company has not authorized or reserved enough shares of its
Common Stock to account for the conversion of this Debenture in full and the
issuance of  shares of the Common Stock in accordance with its terms; or (iii)
the Holder is prohibited for any reason, including without limitation in
connection with any claim, suit, federal or state law, regulation, order,
interpretation, statute, or similar authority, from otherwise converting this
Debenture, then the Holder may elect in Holder’s sole and absolute discretion to
convert any portion of the outstanding Principal Amount and accrued and unpaid
interest under this Debenture into such number of shares of Common Stock of the
Company equal to the dollar amount of the Debenture being converted divided by
the Conversion Price.
 
ARTICLE 4
COVENANTS
 
4.1           Notice of Default.  If any one or more events occur which
constitute or which, with notice, lapse of time, or both, would constitute an
Event of Default, the Company shall forthwith give notice to the Holder,
specifying the nature and status of the Event of Default or such other event(s),
as the case may be.
 
4.2           Payment of Obligations.  So long as this Debenture shall be
outstanding, the Company shall pay, extend, or discharge at or before maturity,
all its respective material obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.
 

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4.3           Compliance with Laws.  So long as this Debenture shall be
outstanding, the Company shall comply with all applicable laws, ordinances,
rules, regulations and requirements of governmental authorities, except for such
noncompliance which would not have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries.
 
4.4           Inspection of Property, Books and Records.  So long as this
Debenture shall be outstanding, the Company shall keep proper books of record
and account in which full, true and correct entries shall be made of all
material dealings and transactions in relation to its business and activities
and shall permit representatives of the Holder at the Holder’s expense to visit
and inspect any of its respective properties, to examine and make abstracts from
any of its respective books and records, not reasonably deemed confidential by
the Company, and to discuss its respective affairs, finances and accounts with
its respective officers and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
 
4.5           Negative Covenants.  As long as any portion of this Debenture
remains outstanding, without the Holder’s prior written consent, the Company
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:
 
(a)           amend its charter documents, including, without limitation, the
certificate of incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;
 
(b)           repay, repurchase or offer to repay, repurchase or otherwise
acquire more than a de minimis number of shares of its Common Stock or Capital
Shares;
 
(c)           pay cash dividends or distributions on any equity securities of
the Company;
 
(d)           enter into any transaction with any Affiliate of the Company which
would be required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and expressly approved
by a majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or
 
(e)           enter into any agreement with respect to any of the foregoing.
 
4.6           No Impairment.  Except and to the extent as waived or consented to
by the Holder, the Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Agreement against impairment.
 
4.7           Intentionally Omitted.
 

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4.8           DWAC Eligibility.  The Company shall use commercially reasonable
efforts to maintain approval by the  Depository Trust Corporation (DTC) to keep
its Common Stock eligible for DWAC/FAST transfer with its transfer agent.
 
ARTICLE 5
EVENTS OF DEFAULT; REMEDIES
 
5.1           Events of Default.  “Event of Default” wherever used herein means
any one of the following events:
 
(a)           the Company shall default in the payment of principal of or
interest on this Debenture as and when the same shall be due and payable;
 
(b)           a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under
(A) any of the Transaction Documents or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary is obligated other
than those agreements in existence as of the date hereof and disclosed in the
SEC Reports;
 
(c)           any representation or warranty made in this Debenture, any other
Transaction Documents, any written statement pursuant hereto or thereto or any
other report, financial statement or certificate made or delivered to the Holder
or any other Holder shall be untrue or false or misleading in any material
respect as of the date when made or deemed made;
 
(d)           the Company or any Subsidiary shall be subject to a Bankruptcy
Event;
 
(e)           except as disclosed in the SEC Reports as of the date hereof, the
Company or any Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced, any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement that (a) involves an
obligation greater than $150,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;
 
(f)           it becomes unlawful for the Company to perform or comply with its
obligations under this Debenture in any respect;
 
(g)           the Common Stock shall not be eligible for listing or quotation
for trading on a Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within five Trading Days;
 
(h)           the Company shall fail to timely file all reports required to be
filed by it with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act otherwise required by the Exchange Act;
 

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(i)           the Company shall be a party to Fundamental Transaction or shall
agree to sell or dispose of all or in excess of 50% of its assets in one
transaction or a series of related transactions (whether or not such sale would
constitute a Fundamental Transaction);
 
(j)           Company, within ten (10) days after written notice from Holder
that it cannot find a broker who will sell the Common Stock issued to Holder
upon conversion, has been unable to identify to Holder a broker who will sell
the Common Stock for Holder;
 
(k)           If the average Volume Weighted Average Price per share of the
Common Stock for any period of three (3) consecutive Trading Days during the
term of the Note is less than $0.01 per share (as adjusted for any stock splits,
stock dividends, combinations, subdivisions, recapitalizations or similar
reorganizations of capital);
 
(l)           The authorized and unissued shares of Common Stock less the issued
shares of Common Stock multiplied by the Conversion Price is greater than the
Principal Amount and any accrued interest outstanding under this Debenture
multiplied by four (4), or a shown in mathematical terms as:
 
(No. of Authorized Unissued - No. of Issued) x Conversion Price > (Principal
Balance + Int.) X 4; or
 
(m)           The Conversion Price of the shares of Common Stock issuable
pursuant to this Convertible Debenture is less than the par value of the
Company’s Common Stock.
 
5.2           Acceleration of Maturity; Rescission and Annulment.  If an Event
of Default occurs and is continuing, then and in every such case the Holder may,
in Holder’s sole and absolute discretion, by a notice in writing to the Company,
rescind any outstanding Conversion Notice and declare that any or all amounts
owing or otherwise outstanding under this Debenture are immediately due and
payable and upon any such declaration this Debenture or such portion thereof, as
applicable, shall become immediately due and payable in cash in an amount equal
to one hundred twenty percent (120%) of the sum of (i) the Principal Amount
thereof, plus (ii) all accrued and unpaid interest thereon to the date of
payment.
 
5.3           Late Payment Penalty.  All overdue accrued and unpaid interest to
be paid hereunder shall entail a late fee at an interest rate equal to the
lesser of 18% per annum or the maximum rate permitted by applicable law which
shall accrue daily from the date such interest is due hereunder through and
including the date of payment in full.  If any portion of the principal of or
interest on this Debenture shall not be paid within ten (10) days of when it is
due, the Discount Multiplier under this Debenture shall decrease by one
percentage point (1%) for each period of ten (10) Business Days that any portion
of such amount remains unpaid by the Company for all conversions of this
Debenture thereafter.
 
5.4           Maximum Interest Rate.  Notwithstanding anything herein to the
contrary, if at any time the applicable Interest Rate as provided for herein
shall exceed the maximum lawful rate which may be contracted for, charged, taken
or received by the Holder in accordance with any applicable law, the rate of
interest applicable to this Debenture shall automatically be deemed to be the
maximum lawful rate.  To the greatest extent permitted under applicable law, the
Company hereby waives and agrees not to allege or claim that any provisions of
this Debenture could give rise to or result in any actual or potential violation
of any applicable usury laws.
 

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5.5           Remedies.           The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Holder, by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Debenture will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this
Debenture, that the Holder shall be entitled to all other available remedies at
law or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach of this
Debenture and to enforce specifically the terms and provisions thereof, without
the necessity of showing economic loss and without any bond or other security
being required.
 
5.6           No Penalty.  Whenever pursuant to this Debenture the Company is
required to pay an amount in excess of the Principal Amount plus accrued and
unpaid interest, the Company and the Holder agree that the actual damages to the
Holder from the receipt of cash payment on this Debenture may be difficult to
determine and the amount to be so paid by the Company represents stipulated
damages and not a penalty and is intended to compensate the Holder in part for
loss of the opportunity to convert this Debenture and to earn a return from the
sale of shares of Common Stock acquired upon conversion of this Debenture at a
price in excess of that price paid for such shares pursuant to this Debenture.
The Company and the Holder hereby agree that such amount of stipulated damages
is not disproportionate to the possible loss to the Holder from the receipt of a
cash payment without the opportunity to convert this Debenture into shares of
Common Stock.
 
ARTICLE 6
MISCELLANEOUS
 
6.1           Surrender of Debentures.  Upon conversion or payment in full on
the Maturity Date, the Holder shall either deliver this Debenture by hand to the
Company at its principal executive offices or surrender the same to the Company
at such address by nationally recognized overnight courier.  Payment of the
Debenture on the Maturity Date, shall be made by the Company to the Holder
against receipt of this Debenture by wire transfer of immediately available
funds to such account(s) as the Holder shall specify by written notice to the
Company.  If payment of such redemption price is not made in full by the
redemption date, or the amount due on maturity is not paid in full by the
Maturity Date, the Holder shall continue have the right to convert this
Debenture as provided in Article 2 hereof or to declare an Event of Default as
provided in Article 5.
 
6.2           Effect of Bankruptcy Event.  The Holder shall be entitled to
exercise its conversion privilege notwithstanding the occurrence of a Bankruptcy
Event or the commencement of any case under the Bankruptcy Code.  The Company
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. § 362 in respect of the conversion of this Debenture.  To the
extent that the Company makes a payment or payments to the Holder or the Holder
enforces or exercises its rights under this Debenture, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 

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6.3           Withholding.  To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Company from any payments made pursuant to this Debenture.
 
6.4           No Rights as Shareholder.  This Debenture does not entitle Holder
to any voting rights or any other rights as a shareholder of the Company prior
to the conversion the Debenture into shares of Common Stock as provided herein.
 
6.5           Saturdays, Sundays, Holidays, etc.  If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then, such action may be taken or such right
may be exercised on the next succeeding Business Day.
 
6.6           Entire Agreement.  This Agreement, the Securities Purchase
Agreement and the other Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements, understandings,
discussions and representations, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
 
6.7           Amendments; Waivers.  No provision of this Agreement may be waived
or amended except in a written instrument signed by the Company and the
Holder.  No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right.
 
6.8           Construction.  The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.  The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.  This Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement or any of
the Transaction Documents.
 
6.9           Notices.  Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective if delivered in the manner and to the
address as specified in the Securities Purchase Agreement.
 

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6.10           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law thereof.  Each
party agrees that all Actions concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the
California Courts (as defined in the Securities Purchase Agreement).  Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the
California Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Action, any claim that it is not personally subject to the jurisdiction of any
such California Court, or that such Action has been commenced in an improper or
inconvenient forum.  Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such Action by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.  Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.  If either party shall commence an Action to
enforce any provisions of a Transaction Document, then the prevailing party in
such Action shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such Action.
 
6.11           Counterparts.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart.  In the event that any signature is
delivered by facsimile transmission or electronic mail in portable document
format or other means intended to preserve the original graphic content of a
signature, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.
 
6.12           Payment Set Aside.  To the extent that the Company makes a
payment or payments to the Holder pursuant to any Transaction Document or the
Holder enforces or exercises its rights thereunder, and such payment or payments
or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred
 

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IN WITNESS WHEREOF, the Company has caused this Debenture to be signed by its
duly authorized officer on the date of this Debenture.
 
Worthington Energy, Inc., a Nevada corporation
 
By:                                                                  
 
Name:                                                              
 
Title:                                                                
 

 
 
 
 
 

 
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EXHIBIT A
 
CONVERSION NOTICE
 
TO:           Attn:  _______________
Worthington Energy, Inc., a Nevada corporation

 
The undersigned owner of the Convertible Debenture due April 30, 2014 (the
“Debenture”) issued by Worthington Energy, Inc., a Nevada corporation (the
“Company”) hereby irrevocably exercises its option to convert a portion of the
Debenture in accordance with its terms, as follows:
 
Conversion Date:
 
 [●]
Conversion Time:
 
 [●]
Principal Amount converted:
 
$[●]
Accrued Interest converted:
 
$[●]
Total amount converted
 
$[●]
Conversion Price
 
$[●]
Shares of Common Stock to be issued:
 
  [●]

 
The undersigned hereby instructs the Company to deliver (i) a stock certificate
representing the share, a new Debenture representing the new Principal Amount
outstanding, and a check in payment of any fractional shares to the following
address:
 
La Jolla Cove Investors, Inc.
1793 Union Street
San Francisco, California 94123
 
_____________________________
 
Name: ________________________     
 
Title:  _________________________

 
 
 
 
 
 
A-1

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