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15303 N. Dallas Parkway, Suite 1050, Addison, TX  75001

Office: 214.444.7444 | Fax: 214.705.2829

 

Mr. Michael P. Logan

Executive Director

Crowncorp Investments Corporation

P.O. Box 2092

League City, Texas 77574

 

LETTER OF INTENT

 

Dear Mr. Logan:

 

This Letter of Intent (“Letter Agreement”) sets forth certain mutual
understandings between Hondo Minerals Corporation, a Nevada corporation (the
“Company”), and the shareholders of Hondo Minerals Corporation (the “Hondo
Shareholders”) and Crowncorp Investments Corporation, a Texas corporation
(hereinafter referred to as the “Acquirer”), regarding a business transaction to
which Target and Acquirer have jointly agreed. The Company and the Hondo
Shareholders are sometimes hereinafter collectively referred to as the “Target.”
Target and Acquirer are sometimes collectively referred to hereinafter as the
“Parties” or individually as a “Party.”

 

BACKGROUND INFORMATION

 

Acquirer intends to acquire 100% of the assets and stock of Target. In exchange,
Acquirer shall provide approximately eighty-eight million dollars ($88,000,000
USD) to Target payable in cash (the “Purchase Price”). Acquirer’s acquisition of
all of the assets and stock of Target shall hereinafter be referred to as the
“Acquisition.” The Acquisition, including its terms and conditions, is described
in greater detail below. The consummation of the Acquisition shall hereinafter
be referred to as the “Closing” or “Close.”

 

Until fully integrated, definitive agreements (the "Definitive Agreements")
setting forth in detail the terms and conditions of the proposed Acquisition has
been successfully negotiated, prepared, authorized, executed and delivered by
and between the Parties, this Letter Agreement shall bind the Parties unless
terminated in compliance with Section 6 below.

 

AGREEMENT

 

1.Terms.

 

(a)Acquisition. The Parties agree that Acquirer shall acquire 100% of the assets
and stock of Target upon consummation of the Definitive Agreements and in
exchange, Acquirer shall provide approximately eighty-eight million dollars
($88,000,000 USD) payable in cash to Target (the “Purchase Price”), according to
the following schedule:

 

(i)Round 1 Deposit: Acquirer shall provide one million six hundred thousand
dollars ($1,600,000 USD) in deposit to the Company upon execution of this Letter
Agreement for the purpose of satisfying certain liabilities and pre-closing
expenses of the Company (the “Round 1 Deposit”) by no later than April 29, 2013;

 

(ii)Round 2 Deposit: Acquirer shall provide one million six hundred thousand
dollars ($1,600,000 USD) in deposit to the Company by no later than May 31, 2013
for the purpose of satisfying certain liabilities and pre-closing expenses of
the Company (the “Round 2 Deposit”);

 

(iii)Round 3 Deposit: Acquirer shall provide two million eight hundred thousand
dollars ($2,800,000 USD) in deposit to the Company upon the consummation of the
Operating Agreement, as hereinafter defined, by no later than May 31, 2013 for
the purpose of satisfying certain liabilities and pre-closing expenses of the
Company (the “Round 3 Deposit”); and

 

(iv)Round 4 Payment: Pursuant to and upon the consummation of the Tender Offer
(as hereinafter defined), Acquirer shall provide: (i) sixty-nine million dollars
($69,000,000), plus the balance of any funds remaining from the Deposits (as
hereinafter defined) after satisfaction of certain liabilities and pre-closing
expenses of the Company, to the Hondo Shareholders; and (ii) the balance of the
Purchase Price to the Company (collectively the “Round 4 Payment”).

 

(b)Conditions to Payment of Deposits. In the event that the Acquisition does not
close within six (6) months after the execution of this Letter Agreement, if
Acquirer fails to provide the Purchase Price in accordance with the schedule set
forth in Section 1(a) of this Letter Agreement or Acquirer otherwise repudiates
its obligations under this Letter Agreement, any amounts paid by Acquirer
pursuant to the Round 1 Deposit, the Round 2 Deposit, and the Round 3 Deposit
(hereinafter collectively referred to as the “Deposits”) shall be deemed a
“Senior Secured Loan” from Acquirer in the total amount equal to any amounts
paid pursuant to the Deposits minus the Break-Up Fee (which is defined below).
The Senior Secured Loan shall have a term of one (1) year and carry an annual
interest rate of ten percent (10%).

 

(c)Definitive Agreements. The Parties intend to execute: (i) a definitive
operating agreement which shall transfer management and control of Target’s
assets and operations to Acquirer (the “Operating Agreement”); and (ii) a tender
offer pursuant to which Acquirer shall purchase all of Target’s issued and
outstanding stock in accordance with all appropriate laws and regulations and
commercially acceptable practices and procedures (the “Tender Offer”). The
Operating Agreement and the Tender Offer shall be collectively referred to
hereinafter as the “Definitive Agreements.” The Definitive Agreements shall
provide for all matters of material concern within the scope of this Letter
Agreement as well as comprehensive representations, warranties,
indemnifications, conditions and agreements by Target, Acquirer and all other
appropriate third parties, if any. It is the intent of the Parties hereto that
they shall exercise their best efforts to conclude the Definitive Agreements to
achieve these objectives. Any conflict or inconsistency shall be resolved
amicably by both Parties.

 

(d)Post-Acquisition Company. Following the Acquisition, Acquirer intends to
carry on the business of Target. The resulting company following the Acquisition
shall hereinafter be referred to as the “Post Acquisition Company.”

 

(e)Outstanding Liabilities of Target and Costs Related to the Acquisition. Prior
to the consummation of the Tender Offer, Target agrees that it shall satisfy all
contracts, commitments and liabilities owed by Target, including, but not
limited to, amounts owed pursuant to any promissory notes, credit facilities,
employment agreements and any other similar agreements or debt instruments
pursuant to which Target may be liable. Further, Target agrees to pay all costs
relating to the Acquisition, including, but not limited to, legal fees,
accounting costs, regulatory filing fees and any other reasonable and necessary
expenses arising from the Acquisition.

 

(f)No-Shop Period. The Parties agree that, upon payment of the Round 1 Deposit
by Acquirer to Target, Target shall not solicit nor accept any competing offer
to be made by a third party for the acquisition of Target unless this Letter
Agreement is terminated in accordance with the conditions of Section 6 herein
(the “No-Shop Period”). Upon expiration of the No-Shop Period, Target shall be
free to accept any third party offer.

 

(g)Conduct in Ordinary Course. Consummation of the Acquisition is subject to
both Parties having conducted business in the ordinary course during the period
between the date hereof and the date of the Acquisition and there shall have
been no material adverse change in the business, financial condition or
prospects of either Party.

 

(h)Closing. The Parties shall close the Acquisition (the “Closing”) as soon as
possible after the execution of the Definitive Agreements, but in no event later
than six (6) months after the execution of this Letter Agreement.

 

(i)Breakup Fee. In the event that the Acquisition does not close within six (6)
months after the execution of this Letter Agreement, if Acquirer fails to
provide the Purchase Price in accordance with the schedule set forth in Section
1(a) of this Letter Agreement or Acquirer otherwise repudiates its obligations
under this Letter Agreement, Target shall be entitled to receive from Acquirer a
breakup fee of two million dollars ($2,000,000 USD) (the “Break-Up Fee”),
provided that Target had satisfied all conditions precedent to the Closing,
Target was ready, willing and able to close the Acquisition, and the Closing did
not take occur through any fault of Target. However, the Break-Up Fee shall not
be assessed if this Letter Agreement is terminated by mutual agreement of the
Parties.

 

(j)SEC Filing Requirements. Target and Acquirer agree to file all necessary
documents with the Securities & Exchange Commission (“SEC”) in connection with
the Definitive Agreements, including, but not limited to, filing disclosures on
Schedule TO and Schedule 14D-9 and to observe all regulatory requirements
relating to the Acquisition.

 

2.                   Representations and Warranties. Target represents and
warrants, and shall make such further representations and warranties customary
to transactions of this type in the Definitive Agreements, including without
limitation, representations and warranties as to: (a) the accuracy and
completeness of the financial statements of Target; (b) the disclosure of all
the contracts, commitments and liabilities of Target, both direct and
contingent, and confirmation that such contracts, commitments and liabilities
have been satisfied prior to consummation of both of the Definitive Agreements;
(c) the physical condition, suitability, ownership and absence of liens, claims
and other adverse interests in the assets and property of Target; (d) Target’s
ownership and ability to bind said assets and property; (e) the absence of
material adverse change in the financial condition or otherwise of the business,
assets, properties or prospects of Target’s business; and (f) Target’s
compliance with laws and regulations applicable to the business and keeping and
maintaining all licenses and permits required for operating the business.

 

3.                   Conditions to Consummation of the Acquisition. The Parties
intend to be bound by this Letter Agreement subject to the consummation of the
Definitive Agreements which, if successfully negotiated, would provide that the
Acquisition will be subject to customary terms and conditions, including without
limitation: (a) obtaining of all requisite regulatory, administrative, or
governmental authorizations and consents; (b) absence of a material adverse
change in the condition of the business, properties, assets or prospects of the
business; (c) absence of pending or threatened litigation, investigations or
other matters affecting the business; (d) confirmation that the representations
and warranties of Target are true and accurate in all respects affecting the
transaction; (e) satisfactory completion of due diligence by Acquirer; (f)
satisfactory completion of audited financial statements by Target for the fiscal
year ended 2012, prepared in accordance with generally accepted accounting
principles; and (g) Target’s delivery to Acquirer of proof of all patents owned
or used by Target in the conduct of its business.

 

4.             Access to Relevant Documents and Properties. To the extent
reasonably required for the purpose of the this Letter Agreement, Target will
cause Acquirer, its counsel, accountants, advisors and all other reasonable
representatives of Acquirer to have access, during normal business hours to all
of the properties, books, contracts, and records of Target, and will cause to be
furnished to Acquirer and its representatives all such information concerning
the affairs of Target as Acquirer or such representatives may reasonably
request. Acquirer and its representatives shall have access to customers and
suppliers of Target for the purpose of gaining information.

 

5.                   Authority. The Parties agree that all consents and
authorizations required to enter into and perform this Letter Agreement have
been obtained and are in full force and effect. Each Party to this Letter
Agreement has the authority to enter into and form this Letter Agreement. The
individuals signing this Letter Agreement have the authority to act as agents of
their respective organizations.

 

6.                   Termination. The Parties agree that this Letter Agreement
will be automatically terminated as follows: (i) by mutual written consent of
Target and Acquirer; (ii) upon written notice by any Party to the other Party if
the Definitive Agreements have not been consummated within six (6) months after
the execution of this Letter Agreement; (iii) if Acquirer fails to provide the
Purchase Price in accordance with the schedule set forth in Section 1(a) of this
Letter Agreement or Acquirer otherwise repudiates its obligations under this
Letter Agreement; or (iv) by either Party when the other Party is conclusively
judged to be in default of this Letter Agreement by a court of competent
jurisdiction. Upon termination of this Letter Agreement, the Parties hereto
shall have no further obligation hereunder unless otherwise stated herein.

 

7.                   Assignment. Neither this Letter Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
Parties hereto without the prior written consent of the other Party hereto and
any attempted assignment without the required consents will be void.

 

8.                   Governing Law. This Letter Agreement is solely for the
benefit of Target and Acquirer. The provisions of this Letter Agreement shall be
governed by, and shall be interpreted under, the laws of the State of Nevada,
without giving effect to such state’s choice of law provisions.

 

9.                   Counterparts. This Letter Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same agreement.

 

 

This Letter Agreement supersedes all prior understandings or agreements between
the Parties.

 

Please sign and date this Letter Agreement in the spaces provided below to
confirm our mutual understandings as set forth in this Letter Agreement and
return a signed copy to the undersigned.

 

Very Truly Yours,

 

HONDO MINERALS CORPORATION

(“Target”)

 

 

Date: ___________________
                                  _______________________________

By: William Miertschin

Its: Chief Executive Officer

 

 

Acknowledged and Agreed to:

 

CROWNCORP INVESTMENTS CORPORATION

(“Acquirer”)

 

 

 

Date: ___________________
                                       _______________________________

By: Michael P. Logan

Its: Executive Director