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Exhibit 10.06
 
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.
 
EQUITY INVESTMENT AGREEMENT

 
Issuer:
 
Worthington Energy, Inc.
Class of Stock:
 
Common Stock
Issue Date:
 
April 30, 2012
Expiration Date:
 
April 30, 2014

 
THIS EQUITY INVESTMENT AGREEMENT (“Agreement”) is being issued as of the date
hereof by and between Worthington Energy, Inc., a Nevada corporation (the
“Company”), to La Jolla Cove Investors, Inc. (“Holder”).  The Company and Holder
are parties to, and this Agreement is being issued and entered into pursuant to
the terms of, that certain Securities Purchase Agreement dated April 30,
2012  Capitalized terms used but not defined in this Agreement shall have the
meanings ascribed in the Securities Purchase Agreement.
 
ARTICLE 1
DESCRIPTION OF RIGHTS
 
1.1           Purchase Rights.  The Company hereby grants to Holder the right,
from time to time during the term of this Agreement, to invest in the Company
through the purchase of up to $2,000,000 of the Company's Common Stock in
accordance with the terms of this Agreement.
 
1.2           Purchase Price.  Each investment under this Agreement will be made
pursuant to the following schedule:
 
 
·
Beginning on the date that is one hundred eighty (180) days following the
execution hereof, and provided the VWAP for five (5) consecutive Trading Days is
above $0.02 prior to purchase, Holder shall purchase $100,000 of Common Stock,
at a price equal to 125% of the VWAP on the day Closing Date.  Holder shall
continue to purchase a minimum of $100,000 of Common Stock per month thereafter,
provided the VWAP is above $0.02, at a price equal to 125% of the VWAP on the
day Closing Date.

 

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·
until the Expiration Date, Holder, at Holder's option, may, at any time and in
an amount in Holder's sole and absolute discretion, purchase the Common Stock of
the Company at a price equal to 125% of the VWAP on the day the Closing Date.

 
Holder understands that the Common Stock purchased pursuant to this Agreement
must be held indefinitely unless such shares of Common Stock are registered
under the Securities Act or an exemption from registration is available.  The
Holder acknowledges that it is familiar with Rule 144 and that the Investor has
been advised that Rule 144 permits resales only under certain
circumstances.  The Holder understands that to the extent that Rule 144 is not
available, the Holder will be unable to sell any Securities without either
registration under the Securities Act or the existence of another exemption from
such registration requirement.
 
For purposes of this Agreement, "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 Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the
Trading Market 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 OTC Bulletin Board is not a
Trading Market, 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.
 
1.3           Term.  The purchase rights granted to Holder pursuant to this
Agreement are exercisable, in whole or in part, at Holder's discretion, at any
time and from time to time on or after the Issue Date and on or before the
Expiration Date set forth above.
 
ARTICLE 2
PURCHASE
 
2.1           Method of Purchase.  Holder may purchase Common Stock by
delivering a duly executed Notice of Purchase in substantially the form attached
as Appendix 1 to the principal office of the Company.  The Notice of Purchase
will be accompanied by wire transfer of immediately available funds for the
investment amount.  The Holder shall not be required to physically surrender
this Agreement to the Company until the Holder has purchased all of the Common
Stock purchasable hereunder, in which case, the Holder shall surrender this
Agreement to the Company for cancellation.  Purchases of a portion of the total
amount of Common Stock available hereunder shall have the effect of lowering the
amount of Common Stock purchasable hereunder in an amount equal to the amount
purchased.  The Holder and the Company shall maintain records showing the amount
of Common Stock purchased and the date of such purchases.  The Holder and any
assignee, by acceptance of this Agreement, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a portion of the
Common Stock hereunder, the amount of Common Stock available for purchase
hereunder at any given time may be less than the amount stated on the face
hereof.
 

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2.2           Delivery of Certificate.  As promptly as practicable after the
receipt of the Notice of Purchase, but in any event not more than two
(2) Business Days after the Company’s receipt of the Notice of Purchase, the
Company shall issue the Common Stock purchased and cause to be mailed for
delivery by overnight courier to Holder, or party of Holder’s choosing, a
certificate representing the Common Stock acquired.
 
2.3           Taxes and Expenses.  Issuance of certificates for Common Stock
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder.
 
2.4           Purchase Limits.  The Company shall not permit any purchase under
this Agreement, and the Holder shall not have the right to purchase Common Stock
under this Agreement, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Purchase, the Holder
(together with the Holder’s Affiliates, and any other Persons acting as a group
together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation.  For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
the Holder and its Affiliates shall include the number of shares of Common Stock
being purchased under this Agreement with respect to which such determination is
being made, but shall exclude the number of shares of Common Stock which are
still subject to purchase under this Agreement or the exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents).  Except as
set forth in the preceding sentence, for purposes of this Section 2.4,
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.   Upon the
written or oral request of a Holder, the Company shall within two Business Days
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding. The “Beneficial Ownership Limitation” shall be 4.99% of the
number of shares of the Common Stock outstanding.  The Holder, upon not less
than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation, provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of the Common Stock
outstanding.
 
2.5           Conditions Precedent.  As a condition precedent to Holder's
obligations hereunder (provided that Holder may, in Holder’s sole and absolute
discretion, waive all or any of the following conditions):
 
(a)           No Event of Default has occurred under this Agreement, the
Convertible Debenture or any other agreement or operative document between the
parties; and
 
(b)           The purchase price for the shares of Common Stock sold pursuant to
this Agreement is not less than the par value of the Company’s Common Stock
 

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ARTICLE 3
ADJUSTMENT TO THE SHARES
 
The number of shares of issuable under this Agreement shall be subject to
adjustment from time to time upon the occurrence of certain events, as follows:
 
3.1           Reclassification.  In case of any reclassification or change of
outstanding Common Stock under this Equity Investment Agreement, and in any such
case, the Holder, upon the purchase hereof at any time after the consummation of
such reclassification or change, shall be entitled to receive in lieu of each
share of Common Stock theretofore issuable upon the purchase under this
Agreement, the kind and amount of shares of stock, other securities, money
and/or property received upon such reclassification or change by a holder of one
share of Common Stock.  The provisions of this Section 3.1 shall similarly apply
to successive reclassifications or changes.
 
3.2           Fundamental Transaction.  If, at any time during the term of this
Agreement, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into
another Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization 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, (v) the Company, directly or
indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental
Transaction”), upon any subsequent purchase under this Agreement, the Holder
shall have the right to receive, for each share of Common Stock that would have
been issuable upon such purchase immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder, the number of shares of
Common Stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction.  For
purposes of any such exercise, the determination of the purchase 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
purchase 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 purchase under this Agreement following such Fundamental
Transaction.
 

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3.3           Notice to 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 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, or 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
mailed to the Holder, 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 mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice.  To the extent
that any notice provided hereunder constitutes, or contains, material,
non-public information regarding the Company or any of the Subsidiaries, the
Company shall simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.  The Holder shall retain its right to purchase
Common Stock under this Agreement during the period commencing on the date of
such notice to the effective date of the event triggering such notice except as
may otherwise be expressly set forth herein.
 
3.4           Fractional Shares.  No fractional Shares shall be issuable upon
the purchase of Common Stock under this Agreement, and the number of shares to
be issued shall be rounded down to the nearest whole share.
 
ARTICLE 4
TRANSFER
 
4.1           Compliance with Securities Laws.  This Agreement may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder.
 
4.2           Transfer Procedure.  Holder shall have the right without the
consent of the Company to transfer or assign in whole or in part this Equity
Investment Agreement and the Shares issuable upon exercise of this Equity
Investment Agreement. Holder shall give written notice thereof to the Company (a
“Transfer Notice”) of such transfer.  Each Transfer Notice shall describe the
manner and circumstances of the proposed transfer in reasonable detail and, if
the company so requests, shall be accompanied by an opinion of legal counsel, in
a form reasonably satisfactory to the Company.
 

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ARTICLE 5
MISCELLANEOUS
 
5.1           No Rights of Shareholder.  This Equity Investment Agreement does
not entitle Holder to any voting rights or any other rights as a shareholder of
the Company prior to the exercise of Holder’s right to purchase Shares as
provided herein.
 
5.2           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.
 
5.3           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.
 
5.4           Restrictions.  The Holder acknowledges that the Common Stock
acquired under this Agreement, if not registered, will have restrictions upon
resale imposed by state and federal securities laws.  Under no circumstances
will this Agreement be settled on a net cash basis.
 
5.5           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.
 
5.6           Amendments; Waivers; No Additional Consideration.  No provision of
this Agreement may be waived or amended except in a written instrument signed by
the Company and the Investor.  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.
 
5.7           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.
 

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5.8           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.
 
5.9           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.  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.
 
5.10           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.
 

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IN WITNESS WHEREOF, the parties hereto have duly caused this Equity Investment
Agreement to be executed and delivered by their duly authorized representatives
as of the date first above written.
 

 
WORTHINGTON ENERGY, INC.
 
By: /s/ ANTHONY MASON
 
Title: Chief Executive Officer
LA JOLLA COVE INVESTORS, INC.
 
By: /s/ TRAVIS W. HUFF
 
Title: Portfolio Manager

 

 

 

 

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APPENDIX 1
 
NOTICE OF PURCHASE
 
1.           The undersigned hereby elects to purchase _____ shares of the
Common Stock of Worthington Energy, Inc. pursuant to the terms of the Equity
Investment Agreement issued to La Jolla Cove Investors, Inc. on April 30, 2012.
 
2.           In connection with this purchase we are delivering by wire transfer
an investment of $____________ by wire transfer in immediately available funds.
 
3.           Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
 
La Jolla Cove Investors, Inc.
1793 Union Street
San Francisco, California 94123
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(Signature)
 
______________________________
(Date)

 
 
 
 
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