EXHIBIT 99.3
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COMMERCE GROUP CORP.
6001 NORTH 91ST STREET
MILWAUKEE, WI 53225-1795
414/462-5310 . FAX 414/462-5312
Stock Symbols: CGCO (OTC BB) . CMG OR CMG.BN (Boston Stock Exchange)
AND/OR COMMERCE/SANSEB JOINT VENTURE (Joint Venture)
AND/OR HOMESPAN REALTY CO., INC. (Homespan)
AND/OR ECOMM GROUP INC. (Ecomm)
AND/OR SAN LUIS ESTATES, INC. (SLE)
AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)
AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)
ALL LOCATED AT THE SAME ADDRESS
May 8, 2000
Mr. Edward L. Machulak
Edward L. Machulak Rollover
Individual Retirement Account
903 West Green Tree Road
River Hills, Wisconsin 53217
Dear Mr. Machulak:
At today's Commerce Group Corp. (Commerce) Directors' meeting, the
Directors were informed about the confirmation, disclosure and status
letter you requested from Commerce and its affiliates to establish and
confirm the amount due and the collateral pledged to the Edward L.
Machulak Rollover Individual Retirement Account (ELM RIRA) as of
Commerce's fiscal year ended March 31, 2000. Today, Commerce's Directors
approved, ratified and confirmed the contents of this letter and
authorized me to authenticate and confirm the outstanding obligations due
to the ELM RIRA, and the collateral pledged to the ELM RIRA as of
Commerce's fiscal year ended March 31, 2000, which are as follows:
1. Promissory Notes and Other Obligations
The total amount of all of the open-ended, secured, on-demand
promissory notes, together with interest due to the ELM RIRA, amounts
to $646,141.24 as of March 31, 2000. These promissory notes, since
April 1, 1994, bear interest, payable monthly, at the rate of 4% over
the prime base interest rate established from time to time by the
First National Bank of Chicago, Chicago, Illinois, (now Bank One),
but not less than 16% per annum (Schedule of Principal and Interest
as of March 31, 2000, Exhibit A).
<PAGE>
2. Collateral Pledged to the ELM RIRA
General Lumber & Supply Co., Inc. (GLSCO), Edward L. Machulak (ELM)
as an individual and not as a Director or Officer of Commerce, the
ELM RIRA and the Sylvia Machulak Rollover Individual Retirement
Account (SM RIRA) collectively and individually identified as the
lender(s), have been assigned on October 19, 1987, all of the rights,
titles, claims, remedies and interest in and to the mine concession
which was granted by the Government of El Salvador to Mineral San
Sebastian, S.A. de C.V. (Misanse) on July 23, 1987, and thereafter
from time to time amended, and which Misanse then assigned to the
Joint Venture on September 22, 1987. This collateral specifically
includes all of the San Sebastian Gold Mine precious metal ore
reserves. Commerce and the Joint Venture have the right to assign
this and any subsequent concession agreement. Reference is made to
Exhibit 2 included in the April 9, 1990 confirmation letter.
Effective February 1996, the Government of El Salvador approved a rev
ised version of the mining law. Therefore, Commerce applied for the
San Sebastian Gold Mine mining concession applicable to this mining
law. This concession is subject to compliance requirements which
have been presented to the El Salvador Director of Mines and
Hydrocarbons. Therefore, it is clearly understood that this
concession, and all of the rights thereunder, in addition to the
concession granted on July 23, 1987, together with all precious metal
ore reserves, is pledged as collateral to all of the parties
mentioned herein.
3. Cross Pledge Collateral Agreement
GLSCO, ELM, the ELM RIRA and the SM RIRA individually are entitled to
specific collateral that has been pledged to them by Commerce, its
subsidiaries, affiliates and the Joint Venture. Upon default by
Commerce, or its subsidiaries or affiliates or the Joint Venture,
GLSCO, ELM, the ELM RIRA and the SM RIRA have the first right to the
proceeds from the specific collateral pledged to each of them.
Commerce, its subsidiaries, affiliates and the Joint Venture, also
have cross-pledged the collateral without diminishing the rights of
the specific collateral pledged to each of the following: GLSCO,
ELM, the ELM RIRA and the SM RIRA. The purpose and the intent of the
cross pledge of collateral is to assure GLSCO, ELM, the ELM RIRA and
the SM RIRA, that each of them would be paid in full; thus, any
excess collateral that would be available is for the purpose of
satisfying any debts and obligations due to each of the named
parties. The formula to be used (after deducting the payments made
from the specific collateral) is to total all of the debts due to
GLSCO, ELM, the ELM RIRA and the SM RIRA, and then to divide this
total debt into each individual debt to establish each individual's
percentage of the outstanding debt due. This percentage then will be
multiplied by the total of the excess collateral to determine the
amount of proceeds derived from the excess collateral and then the
amount due to each of them would be distributed accordingly.
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4. Cancellation of Inter-Company Debts Upon Default
Since part of the collateral pledged to GLSCO, ELM, the ELM RIRA and
the SM RIRA is the common stock of Homespan, Ecomm, Sanseb, SLE,
Misanse, UDI and the interest in the ownership of the Joint Venture,
Commerce agreed, upon default of the payment of principal or interest
to any of the individual lender(s) mentioned herein, that it will
automatically cancel any inter-company debts owed to Commerce by any
of its wholly-owned subsidiaries or affiliates or the Joint Venture
at such time as any of the stock or Joint Venture ownership is
transferred to the collateral holders as a result of default of any
promissory note.
5. Guarantors
This agreement further confirms that Commerce and all of the
following are guarantors to the loans made by the ELM RIRA to
Commerce: Joint Venture, Homespan, Ecomm, SLE, Sanseb and UDI. They
jointly and severally guarantee payment of the note(s) that were
issued and also agree that these note(s) may be accelerated in
accordance with the provisions contained in the agreement and/or any
collateral or mortgages securing these notes. Also, Commerce, all of
its subsidiaries and the Joint Venture agree to the cross pledge of
collateral for the benefit of GLSCO, ELM, the ELM RIRA and the SM
RIRA. Reference is made to Exhibit 3 included in the April 9, 1990
confirmation letter.
6. Omissions
Commerce believes that it has included all of its obligations, monies
due and has listed all of the collateral due to the ELM RIRA,
however, since these transactions have taken place over a long period
of time in which changes could have taken place, it is possible that
inadvertently some item(s), particularly collateral, could have been
omitted. If that should prove to be a fact, then Commerce, the Joint
Venture, Homespan, Ecomm, SLE, Sanseb, and UDI agree that those
omissions of collateral, if any, are meant to be included as
collateral with this confirmation and agreement.
<PAGE>
If you are in agreement with the contents of this letter, please sign
below and return one copy to Commerce.
Very truly yours,
COMMERCE GROUP CORP.
/s/ Edward A. Machulak
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Edward A. Machulak
Secretary
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The contents of this letter are agreed by the following:
COMMERCE/SANSEB JOINT VENTURE HOMESPAN REALTY COMPANY, INC.
as Guarantor (Joint Venture) as Guarantor (Homespan)
/s/ Edward L. Machulak /s/ Edward L. Machulak
_______________________________________ _________________________________
By: Edward L. Machulak, Auth. Designee By: Edward L. Machulak, President
ECOMM GROUP INC. SAN LUIS ESTATES, INC.
as Guarantor (Ecomm) as Guarantor (SLE)
/s/ Edward A. Machulak /s/ Edward L. Machulak
____________________________________ _________________________________
By: Edward A. Machulak, Secretary By: Edward L. Machulak, President
SAN SEBASTIAN GOLD MINES, INC. UNIVERSAL DEVELOPERS, INC.
as Guarantor (Sanseb) as Guarantor (UDI)
/s/ Edward L. Machulak /s/ Edward L. Machulak
____________________________________ __________________________________
By: Edward L. Machulak, President By: Edward L. Machulak, President
Accepted by:
/s/ Edward L. Machulak
_______________________________________
Edward L. Machulak Rollover Individual
Retirement Account
Date: May 8, 2000
<PAGE>
Exhibit A to Exhibit 99.3
(Schedule of Principal and Interest as of March 31, 2000
has been purposely omitted as it only reflects
the calculations of the principal and interest.)
