COMMERCE GROUP CORP.
6001 NORTH 91ST STREET
MILWAUKEE, WISCONSIN 53225-1795
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, OCTOBER 20, 2000
To the Shareholders of Commerce Group Corp.:
The Annual Meeting of Shareholders of Commerce Group Corp. (the
"Company") will be held at the Tripoli Country Club, 7401 N. 43rd Street,
Milwaukee, Wisconsin 53209, on Friday, October 20, 2000, at 3:00 p.m.
(local time) for the following purposes:
1. To elect one director to serve for the period specified herein and
until his successor is elected and qualified;
2. To ratify the selection of Bruce Michael Redlin, C.P.A. as the
Company's independent accountant for the fiscal year ended March 31,
2001; and
3. To transact such other business as may be properly brought before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Wednesday,
August 23, 2000, as the record date for determination of shareholders
entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
YOU ARE INVITED TO ATTEND THIS MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE
MEETING. THEREFORE, YOU ARE URGED TO PROMPTLY SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED WITHIN THE UNITED STATES. YOU MAY REVOKE YOUR PROXY AT
ANY TIME PRIOR TO ITS EXERCISE BY GIVING WRITTEN NOTICE TO THE SECRETARY
OF THE COMPANY. IF YOU RETURN AN EXECUTED PROXY AND THEN ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON. ATTENDANCE AT THE
MEETING WILL NOT BY ITSELF REVOKE A PROXY.
By Order of the Board of Directors
/s/ Edward A. Machulak
Edward A. Machulak
Executive Vice President
and Corporate Secretary
August 23, 2000
Milwaukee, Wisconsin
<PAGE>
COMMERCE GROUP CORP.
6001 NORTH 91ST STREET
MILWAUKEE, WISCONSIN 53225-1795
PROXY STATEMENT
AUGUST 23, 2000
______________
This Proxy Statement is furnished by the Board of Directors of Commerce
Group Corp. (respectively the "Board" and the "Company" or "Commerce") in
connection with the solicitation of proxies for use at the Annual Meeting
of Shareholders to be held at 3:00 p.m. C.D.T. on Friday, October 20,
2000, or at any adjournment thereof (the "Annual Meeting" or "Meeting")
pursuant to the Notice of said Meeting. This Proxy Statement and the
proxies solicited hereby are being first mailed to shareholders of the
Company on or about August 23, 2000.
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL
MEETING, TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. You may revoke your proxy at any time
prior to its exercise by giving written notice to the Secretary of the
Company. If you return an executed proxy and then attend the Annual
Meeting, you may revoke your proxy and vote in person. Attendance at the
Annual Meeting will not by itself revoke a proxy.
Unless otherwise directed in the accompanying proxy, persons named
therein will vote FOR the election of the one director nominee listed
herein and FOR the ratification of the selection of Bruce Michael Redlin,
C.P.A. as the Company's independent accountant for the fiscal year ended
March 31, 2001. As to any other business that may properly come before
the Meeting, the proxy holders will vote in accordance with the
recommendations of the Board of Directors.
VOTING SECURITIES
The close of business on August 23, 2000 has been fixed as the record
date for determination of shareholders entitled to notice of and to vote
at the Annual Meeting or any adjournment thereof. As of June 30, 2000,
there were issued, outstanding and entitled to vote 13,888,929 shares of
Commerce's common stock, $0.10 par value (common stock). Each share of
common stock entitles the shareholder to one vote on all matters
presented at the meeting.
<PAGE>
PRINCIPAL SHAREHOLDERS AND OWNERSHIP BY MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Commerce's common stock as of June 30, 2000, by
(i) each of its directors who own Commerce common stock, and (ii) all
directors and officers as a group.
Amount and Nature of
Beneficial Ownership (1)(2)
---------------------------
Name and Address of
Beneficial Owner* Position Shares Percent
------------------- -------- ------ -------
Edward L. Machulak Chairman of the
Board, Director,
President, Treasurer,
Director Emeritus,
Member of the Audit
and Executive
Committee 1,579,419(3) 11.37%
Edward A. Machulak Director, Executive
Vice President,
Secretary and Member
of the Executive
Committee 190,488(4) 1.37%
Sidney Sodos Director and Member
of the Audit Committee 59,185 .43%
Clayton H. Tebo Director and Member
of the Audit Committee 54,112 .39%
General Lumber & Supply
Co., Inc. (General Lumber) 878,000(3) 6.32%
------------ -------
All Directors, Officers
and Affiliates as a Group 2,761,204 19.88%
*All directors and beneficial owners listed above can be contacted
through Commerce's offices located at 6001 N. 91st Street, Milwaukee,
Wisconsin 53225-1795.
(1) Unless otherwise indicated, shares shown as beneficially owned are
those as to which the named person possesses sole voting and
investment power.
(2) All shares indicated are based on the ownership of Commerce's
shares.
(3) The 1,579,419 common shares owned directly by him as of June 30,
2000 include the 97,161 shares held jointly with his wife, but do
not include the 878,000 common shares owned by General Lumber, a
privately-held company in which he owns 55% of its common shares. If
these 878,000 shares were added to the 1,579,419 common shares owned
by him directly, then the total shares under his control amount to
2,457,419 and would represent a 17.69% ownership of shares based on
13,888,929 common shares issued and outstanding as of June 30, 2000.
This total number of shares does not assume the exercise of the
1,880,135 existing stock options or stock rights into common shares
of which 83,900 option shares are owned by his wife, 568,000 option
shares are owned by General Lumber, and the balance are owned by
unrelated parties.
The number of common shares owned by Sylvia Machulak, wife of Edward
L. Machulak, the President of the Company, personally as of June 30,
2000, is 115,967. The number of shares owned by the Sylvia Machulak
Rollover Individual Retirement Account as of June 30, 2000, is
250,000. If the shares owned by Sylvia Machulak and her Rollover
Individual Retirement Account were added to the 2,457,419 above
described shares owned by Edward L. Machulak and related parties,
then the total shares would amount to 2,823386, or a 20.33%
ownership. Mr. Machulak disclaims any beneficial interest in these
shares owned by Sylvia Machulak, or her IRA.
(4) Does not include 1,000 shares owned by Carol A. Machulak, Edward A.
Machulak's wife, in which he disclaims any beneficial interest.
<PAGE>
On June 1, 1998, correspondence, together with a loan agreement, had been
submitted to a lender for execution in connection with the Company's
understanding of a non-related publicly-traded common stock loan
arrangement. The lender verbally acknowledges the loan agreement and all
of its terms and conditions, but has not formally executed it in writing.
The Company borrowed from the lender a total of 125,300 common shares of
a non-related, publicly-held corporation and sold those shares for
approximately $529,425. The lender, until January 15, 2000, had the
option of receiving payment by the return of the 125,300 common shares
borrowed plus interest which is to be paid by the Company's issuing
64,485 of the Company's restricted common shares. In lieu of the payment
of the return of the 125,300 non-related company shares, the lender had a
right to receive up to 625,235 of the Company's restricted common shares
in full payment of the Company's obligations. On January 15, 2000, via
written correspondence, the lender exercised his option to accept 625,235
of the Company's common shares in full payment for the Company's
outstanding obligations. In order for the Company to issue the Company's
restricted common shares, the Company and its transfer agent require an
investment letter agreement which was delivered to the lender on January
24, 2000. The lender has not yet returned the investment letter
agreement to the Company.
On January 27, 1999, and thereafter, amended on May 25, 1999, the Company
and its subsidiary, Ecomm Group Inc., entered into an agreement with
Interactive Business Channel, Inc. (IBC) to perform certain public
relations and to design, develop, market and manage Ecomm's portal site
(MyInternet.to) pursuant to a certain business plan agreed to by all
parties concerned. In consideration and payment for IBC's services, the
Company issued 500,000 of its restricted common shares at no cost to IBC.
On June 14, 2000, the Company's legal counsel filed a complaint in the
State of Wisconsin, Circuit Court, Milwaukee County, on behalf of Ecomm
and the Company as plaintiffs against IBC and Mr. Matthew Marcus, as an
individual, both of Irvine, California, as defendants. Reference is made
to "Certain Relationships and Related Transactions," item number 10, for
additional information.
PROPOSAL NO. 1--ELECTION OF A DIRECTOR
NOMINEES FOR ELECTION
The Company's Directors, for continuity, are divided into three Classes:
I, II and III, to permit staggered terms for each class of Directors and
they are elected for a three-year term. They are elected by class at
each annual meeting. At this annual meeting, one director will be
elected to serve until the next election of the Class II Director, for
which such Director shall have been chosen and until such time as his
successor shall be elected and qualified. The nominee receiving the
greatest number of votes at this annual meeting for the one Director
position will be elected. The number of Directors which shall constitute
the whole board shall be five, but such number may be altered from time
to time by amendment of the By-Laws provided that such number shall not
be less than three nor more than twelve. Presently, four Directors
constitute the total number of Directors.
The nominee for election as Class II Director at this Annual Meeting is
set forth in the table below. He is an incumbent Director who was elected
at the 1997 Annual Meeting of Shareholders for a three-year term. The
nominee has consented to serve as a Director, if elected. Unless
authority to vote for any Director is withheld in a proxy, it is intended
that each proxy will be voted FOR such nominee. In the event that the
nominee for Director should before the Meeting become unable to serve, it
is intended that shares represented by proxies which are executed and
returned will be voted for such substitute nominee as may be recommended
by the Company's existing Board of Directors, unless other directions are
given in the proxies. To the best of the Company's knowledge, the
nominee will be available to serve.
<PAGE>
THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR THE NOMINEE LISTED BELOW.
Class Expiration
Nominee Age Position Director Since of Term of Office
------- --- -------- -------------- -----------------
Edward A. Machulak 48 Director October 28, 1985 Class II, 2003
Edward A. Machulak, age 48, (son of the Chairman and President) has been
a Class II Director since October 28, 1985, and he was elected as a
member of the Directors' Executive Committee on March 11, 1991; Executive
Vice President as of October 16, 1992; Secretary as of January 12, 1987;
and he was the Assistant Secretary from April 15, 1986 through January
12, 1987. He is also a Director, Vice President and Secretary of:
Homespan Realty Co., Inc. and San Luis Estates, Inc.; and is a Director
and Secretary of San Sebastian Gold Mines, Inc. He was a Director and
Secretary of Ecomm Group Inc. from 1997 to May 16, 2000. On May 17, 2000
he was elected as a Director and President of Ecomm Group Inc. His
business experience is as follows: Director and Corporate Secretary of
General Lumber & Supply Co., Inc., a building material wholesale and
retail distribution center from April 1, 1970 to November 1983; Director
and President of Gamco, Inc., a marketing and advertising company, from
November 1983 to present; Director and President of Circular Marketing,
Inc., an advertising and marketing business, from March 1986 to present;
Director and President of MacPak, Inc., a developer of an Internet City
Guide (miy.com), since September 26, 1996 to present; Director and
President of Edjo, Ltd., a company involved in the development,
subdividing and sale of land and real estate from June 7, 1973 to
present; Director and President of Landpak, Inc., a corporation which
owns, operates, manages and sells real estate from September 1985 to
present; and he was involved in other corporate real estate ventures and
business activities since 1976.
DIRECTORS WHOSE TERMS OF OFFICE HAVE NOT EXPIRED
Class I Director - term expires in 2002
Clayton H. Tebo, age 87, has been a Director of the Company since March
11, 1991. He has been a member of the Audit Committee since February 9,
1998. Mr. Tebo had been a Director of the Company from the Company's
inception, September 1962 through March 1, 1969. Mr. Tebo has been
retired since March 1969, however, he has been retained from time to time
by the Company as a consultant for special projects. He also was the
special assistant to the President prior to and after his 1969
retirement.
Class III Directors - term expires in 2001
Edward L. Machulak, age 74, has been elected as a Class III Director and
he has been employed by the Company since September 1962. Mr. Machulak
has served as the President, Director, and Chairman of the Board of
Directors of the Company since 1962, Treasurer since 1978, and on March
11, 1991, he was elected as a Member of the Directors' Executive
Committee. He has been a member of the Audit Committee since February 9,
1998.
He is a Director and the President for each of the Company's
subsidiaries: Homespan Realty Co., Inc.; San Luis Estates, Inc.; San
Sebastian Gold Mines, Inc.; and Universal Developers, Inc. He was a
Director, President and Treasurer of Ecomm Group Inc. until January 31,
1999 when he was elected as Director and Treasurer. On May 17, 2000, he
was elected as Director, Secretary and Treasurer of Ecomm Group Inc. He
is the authorized representative of the Commerce/Sanseb Joint Venture.
He is a Director and Treasurer of Mineral San Sebastian S.A. de C.V.
Also, he is involved in various capacities with the following companies:
General Lumber & Supply Co., Inc., Director; Edjo, Ltd., Director and
Secretary; and Landpak, Inc., Director and Secretary.
Sidney Sodos, age 62, has been elected as a Class III Director. He has
been a Member of the Audit Committee since February 9, 1998. Mr. Sodos
is the senior member of the law firm of Sodos & Kafkas, S.C. He is
licensed and has practiced law in the federal and state courts in the
State of Wisconsin for a period of more than 35 years. He specializes in
corporate litigation and media law. He was the Executive Director of the
American Federation of Television and Radio Artists in the States of
Wisconsin and Illinois (1974-1981). He served as a member of the North
Shore East Water Trust, a division of a local municipality. He also was
a moderator of a radio program (WTMJ Milwaukee, Wisconsin) "The Law and
Sometimes Justice."
<PAGE>
COMMITTEES AND MEETINGS
The Board of Directors has an Audit Committee and an Executive Committee.
It does not have a Compensation or Investment Committee as the Board of
Directors in its entirety or the Executive Committee act on those
matters.
The Audit Committee of the Board of Directors which was formed on
February 9, 1998, currently consists of three members: Messrs. Edward L.
Machulak, Sidney Sodos and Clayton H. Tebo. The Audit Committee reviews,
acts on, and reports to the Board of Directors with respect to auditing
performance and practices, risk management, credit risks, financial
accounting and tax matters. The Committee reviews the selection of the
Company's independent accountant, the scope of the annual audit, the
nature of non-audit services, the fees to be paid to the independent
accountant, the performance of the Company's independent accountant, the
accounting practices of the Company, and all matters related. It met
every quarter after the regular quarterly and annual Directors' meetings.
There is no additional compensation paid for being a member of the Audit
Committee.
The Executive Committee of the Board of Directors currently consists of
Messrs. Edward L. Machulak and Edward A. Machulak (son of the President).
The Executive Committee was formulated to provide the authority to act on
behalf of the Directors during such time when the Directors are not in
session; two members of the Directors are elected to this committee. The
Executive Committee provides additional resources to assist management in
making strategic decisions, consults with management on technical,
tactical, organizational and administrative matters, acquisitions and
dispositions, exploration targets, mergers and policies regarding the
long-term growth of the Company. The fee paid to a Director of the
Executive Committee, (except the President), is $400 for each meeting
attended.
During the Company's fiscal year ended March 31, 2000, the Board of
Directors met four times at the regularly scheduled meetings and once at
the Annual Directors' meeting. The Audit Committee met four times after
the regularly scheduled Directors' meetings and once after the Annual
Directors' Meeting. The Executive Committee met at each of the scheduled
eight meetings. All of the Directors holding office, except for Director
Sidney Sodos, attended 100% of each of the meetings. The only meetings
Director Sidney Sodos was not able to attend were the Annual Directors'
meeting and the Audit Committee meeting that followed it.
The Director's fees of $1,200 for each meeting held (excluding the
President) are based on a minimum of four quarterly scheduled meetings
held in February, May, August and November of each year. These fees,
together with travel and out-of-pocket expenses, if any, are payable
quarterly on the date of each quarterly scheduled meeting or if no
quarterly meeting is held then such fees are payable on the second Monday
of said month that the meeting was to be held. On January 1, 1981, the
Directors unanimously agreed by resolution that cash payment of
Directors' fees will be deferred until such time as the Company has
adequate annual operating profits and a cash flow to make such payments.
This resolution was reconfirmed on October 16, 1992. On September 16,
1994, at the Annual Directors' Meeting, the Directors unanimously adopted
a resolution that in lieu of cash payment of Directors' fees, the
Directors have an option to exchange the amount due to them for the
Company's common shares on or before the close of each fiscal year based
on a formula determined by the Directors. The Directors, in order to
have a vested interest in the Company, are encouraged to own the
Company's common shares. The Directors, at a regularly scheduled meeting
held on February 14, 2000 established the conversion price for these and
other common shares to be issued to be based on the average closing price
of the shares traded during a period of time beginning on January 3,
2000 through February 11, 2000 which averaged $0.34 per share. The same
conversion price was used in determining the number of shares issued for
employee bonuses and for consultants and services rendered. During March
2000, three Directors exercised their rights to convert the sum due to
them for Director fees and Officer compensation, which combined amounted
to $33,400 for 98,236 of the Company's common shares.
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table discloses compensation for the three fiscal years
ended March 31, earned, but not received (accrued) by the Company's Chief
Executive Officer; there was no other Company Executive Officer that was
paid a salary in excess of $100,000 during this fiscal year:
All Other
Annual Compensation
Name and Compensation (1) (1) (2) (3) &
Principal Position Year Salary Bonus (4)
------------------ ---- ------ ----- ---
Edward L. Machulak 2000 $165,000 (None Paid-Accrued) (1)&(2) None
(Chairman, 1999 $165,000 (None Paid-Accrued) (1)&(2) None
President, 1998 $165,000 (None Paid-Accrued) (1)&(2) None
Chief Executive
Officer and
Treasurer)
(1) The total salaries payable to Edward L. Machulak amount to
$1,839,015 and were accrued since April 1, 1981, or for a period of
19 years: 11 years at $5,645 monthly, four and one-half years at
$9,562.50 monthly, and three and one-half years at $13,750 monthly.
The accrual of salaries is at the request of the Company to assist
the Company with its cash preservation. The salaries do not include
the value of perquisites and other personal benefits because the
aggregate amount of such compensation, if any, does not exceed the
lesser of $50,000 or ten percent of the total amount of accrued
annual salary and bonus owed to him.
(2) On February 16, 1987, by a Consent Resolution of all of the
Directors, Edward L. Machulak, the President, was awarded as a bonus
compensation the following: For a period of twenty (20) years,
commencing the first day of the month following the month in which
the Company begins to produce gold from its El Salvadoran gold
mining operations, the Company will pay annually to the President
two percent (2%) of the pre-tax profits earned from these
operations.
(3) On March 11, 1991, the Directors decided that it would be in the
best interest of the Company to reactivate its Executive Committee
with authority to act on behalf of the Directors during such time
when the Directors are not in session; two members were elected to
this committee. The Executive Committee meets each month or more
often when a regular Directors' meeting is not held. The members of
the Executive Committee (excluding the President of the Company, who
is a Director and a member of the committee) receive a $400
compensation fee for each meeting attended. During this fiscal
year, a total of eight executive meetings were held and all were
100% attended. On February 9, 1998, the Directors formed an Audit
Committee which meets after each quarterly Directors' meeting and
after the Annual Directors' meeting, providing there is business to
be conducted, at no additional compensation. During the fiscal
period ended March 31, 2000, five Audit Committee meetings were held
and all were 100% attended except for the Audit Committee meeting
held after the Annual Directors' Meeting which Director Sidney Sodos
was unable to attend.
(4) Members of the Board of Directors who were Directors as of December
5, 1979, and Directors thereafter who have been a Director for a
period of 15 years or more and do not stand for re-election shall
become Directors Emeriti. Such Directors are entitled to receive
notice of all Board meetings, to attend such meetings, and to
receive Directors' fees regardless of attendance at any meeting, at
a fee of not less than that provided prior to becoming a Director
Emeritus. An individual serving solely as a Director Emeritus is
not entitled to vote on any matter before the Board nor to be
counted as a member of the Board for the purpose of determining a
quorum. At present, there is no person who is not a Director that
qualifies as a Director Emeritus.
There have never been any arrangements or understandings between any
Director and any other person pursuant to which any Director was selected
as a Director.
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
There were no Options/SAR benefits provided to any Officers for
compensation during this fiscal period.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by all of
the Directors; presently Edward L. Machulak, Edward A. Machulak, Sidney
Sodos and Clayton H. Tebo. During the fiscal year ended March 31, 2000,
the Directors have considered many factors such as business performance,
cash preservation, Company goals, and whatever other component that was
necessary to arrive at a just compensation for the Company's Officers.
They also considered the needs of attracting, developing, rewarding and
retaining highly qualified and productive individuals by providing them
with attractive compensation awards. The Directors want to ensure
compensation levels that are externally competitive and internally
equitable, therefore, the Directors agreed to provide an encouraging
executive stock ownership program to enhance a mutuality of interest with
other shareholders. The Directors are committed to a strong, positive
link between the Company's achievement of its goals, taking into consider-
ation its financial condition and compensation and benefit plans.
BASE SALARY
The Directors review each Officer's salary annually. In determining
appropriate salary levels, they consider the level and scope of
responsibility, experience, Company and individual performance, internal
equity, as well as pay practices of other companies relating to
executives of similar responsibility. By design, they strive to set
executives' salaries at competitive market levels.
They believe maximum performance can be encouraged through the use of
appropriate incentive programs. Incentive programs for executives are as
follows:
ANNUAL INCENTIVES
Annual incentive awards are made to executives and managers to recognize
and reward corporate and individual performance. The Directors' plan
provides an incentive fund. A portion of the available bonus is reserved
for discretionary performance awards by the Company's President for other
employees whose efforts and performance are judged to be exceptional.
Due to the Company's preservation of cash and because the Company has
limited revenues and it is not in full gold production, the incentives
have been deferred, but are expected to be payable at some future date.
The amount individual executives may earn is directly dependent upon the
individual's position, responsibility, and ability to impact the
Company's financial success. External market data is reviewed
periodically to determine competitive incentive opportunities for
individual executives.
EQUITY-BASED COMPENSATION
NON-STATUTORY STOCK OPTION ("NSO") AND STOCK APPRECIATION RIGHTS ("SAR")
PLANS
The purpose of these plans is to provide additional incentives to
employees to work to maximize shareholder value. The NSO and SAR plans
generally utilize a vesting period to encourage key employees to continue
in the employ of the Company. The Directors are charged with
responsibility for administering and granting non-statutory stock options
and stock appreciation rights. Due to the Company not being in full gold
production and having indeterminable profits, no NSOs or SARs have ever
been granted, but it is intended to provide these benefits at such time
in the future as determined by the Directors.
<PAGE>
SERVICES AND CONSULTING COMPENSATION PLAN COVERED UNDER S.E.C. FORM S-8
REGISTRATIONS
On July 16, 1998, the Company filed its second Securities and Exchange
Commission Form S-8 Registration Statement No. 333-59209 under the
Securities Act of 1933, and it registered 1,000,000 of the Company's
$0.10 par value common shares. The purpose of this filing was to provide
employees, consultants and others that perform services for the Company,
its common shares for services rendered. The Plan also provides that the
Directors may cause the issuance of common stock and/or option grants
under the terms and conditions of this agreement. Since July 16, 1998,
the Company has issued under this Plan its common shares in payment for
compensation as follows: Director fees, including accumulated fees from
prior years, 60,700; due to Officers, 40,000; employee bonuses, 76,500;
consulting services, 22,800; and for employee benefits, 800,000; for a
total of 1,000,000 shares. As of March 31, 2000, all of the 1,000,000
Company common shares have been issued.
On January 26, 2000, the Company filed its third Securities and Exchange
Commission Form S-8 Registration Statement No. 333-95397 under the
Securities Act of 1933, and it registered 1,000,000 of the Company's
$0.10 par value common shares for the purpose of distributing shares
pursuant to the guidelines of the Company's Services and Consulting
Compensation Plan. From the 1,000,000 common shares registered, as of
March 31, 2000, 181,876 common shares were issued as follows: Director
fees, 28,349; due to Officers, 44,118; employee bonuses, 74,159; and for
consulting services, 35,250.
CHIEF EXECUTIVE OFFICER
In order to induce the President of the Company, Mr. Edward L. Machulak,
to continue using his best efforts to place the gold mines into
production and to have the Company operate an Internet business, the
Directors have assured him that he will be adequately compensated for his
achievements. This additional recompense is to make certain that the
Company's goal to produce gold is realized and that an Internet business
will be established. The Directors believe that maximum performance will
be achieved due to the assurance of these continuous promises.
The fact that the President of the Company has not received any cash
payment for salaries for more than 19 years and that the value of the
amount due to him has deteriorated due to inflation and other factors,
the Directors have agreed to justly take these conditions into
consideration at such time when the Company will be in a position to make
a cash or any other mutually satisfactory payment arrangement.
The Directors believe that the Company's President is achieving the
Company's objective considering that the funding arrangements for both
the mining operations and the Internet continue to be problematic.
EMPLOYMENT AGREEMENTS
With the exception of the disclosure made herein relative to Mr. Edward
L. Machulak's (President) bonus compensation, and because the Directors
have agreed that he will be adequately compensated, he has no separate
employment agreements, but he has a general understanding of the
incentive compensation to be provided to him. There are no termination
or severance arrangements.
<PAGE>
PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Media General Financial Services of Richmond, Virginia prepared the
Company's Performance Graph assuming that $100 was invested on March 31,
1995, by the purchase of the Company's shares and it then compares the
Company's performance through March 31, 2000, against two measurements:
the NASDAQ Market Index (used as the Broad Market Index) and the Peer
Group Index (Industry SIC Code Index 1041--Gold Ores or 1997 NAICS -
212221). The Company's shares were halted from trading on Nasdaq from
January 29, 1999 through March 31, 1999, and then were delisted on March
31, 1999. Trading then took place on the pink sheets and beginning on
May 5, 1999 on the Over the Counter Bulletin Board (OTCBB). Some
companies in last year's "Peer Group" were delisted or removed from
trading or quotes and/or information was not available to Media General
Financial Services. Therefore, this year's "Peer Group" only includes
those companies that were used last year for which information was
available. The graph also assumes the reinvestment of dividends, if
any, for each measurement period; there were none. The information shown
on the chart below is historical, does not reflect the value of the gold
ore reserves, and it is not indicative of the Company's future
performance.
[The chart/graph could not be converted into ASCII. The data used to
make the chart/graph is listed below.]
COMPARISON OF CUMULATIVE TOTAL RETURN
OF THE COMPANY, PEER GROUP AND NASDAQ MARKET INDEX
-------------------------------FISCAL YEAR ENDING MARCH 31-------------
COMPANY 1995 1996 1997 1998 01/29/1999 2000
------- ---- ---- ---- ---- ---------- ----
COMMERCE GROUP CORP. 100 61.11 47.22 20.83 37.50 8.33
PEER GROUP INDEX 100 158.89 176.59 102.60 42.87 39.19
NASDAQ MARKET INDEX 100 134.51 150.48 227.41 314.46 568.51
The Broad Market Index chosen was the NASDAQ Market Index.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company's past revenues have been insufficient to meet its financial
obligations when they became due. Various transactions with management
on an individual basis and with the affiliates were entered into by the
Company in order to utilize assets whenever possible, other than cash to
meet its or its affiliates' obligations when due and thereby preserve the
Company's cash resources for use in meeting its other liabilities. These
disclosures are updated herein as follows:
(1) EDWARD L. MACHULAK TRANSACTIONS (PRESIDENT OF THE COMPANY)
With the consent and approval of the Directors, the President of the
Company, as an individual and not as a Director or Officer of the
Company, entered into the following financial transactions with the
Company, the status of which is reflected as of March 31, 2000:
The Company, in an attempt to preserve cash, had prevailed on its
President to accrue his salary for the past 19 years: 11 years at $67,740
annually ($745,140); four and one-half years at $114,750 annually
($516,375); and three and one-half years at $165,000 annually ($412,500)
for a total of $1,839,015.
The amount of funds which the Company has borrowed from its President
from time to time, together with accrued interest, amounts to $3,072,268.
To evidence this debt, the Company, with the Directors' approval, had
issued its President a series of open-ended, secured, on-demand
promissory notes, with interest payable monthly at the prime rate plus
2%, but not less than 16% per annum.
In order to satisfy the Company's cash requirements from time to time,
the Company's President has sold or pledged as collateral for loans,
shares of the Company's common stock owned by him. In order to
compensate its President for selling or pledging his shares on behalf of
the Company, the Company has made a practice of issuing him the number of
restricted shares of common stock equivalent to the number of shares sold
or pledged, plus an additional number of shares equivalent to the amount
of accrued interest calculated at the prime rate plus 3% per annum and
payable monthly. The Company received all of the net cash proceeds from
the sale or from the pledge of these shares. The Company returned all of
the shares (375,566) borrowed from him and issued 35,738 restricted
common shares in full payment for the interest during this fiscal
period. It may owe additional common shares for such shares loaned or
pledged by him for collateral purposes to others for the benefit of the
Comp any, all in accordance with the terms and conditions of
Director-approved open-ended loan agreements dated June 20, 1988, October
14, 1988, May 17, 1989, and April 1, 1990.
On February 16, 1987, the Company granted its President, by unanimous
consent of the Board of Directors, compensation in the form of a bonus in
the amount of 2% of the pre-tax profits realized by the Company from its
gold mining operations in El Salvador, payable annually over a period of
20 years commencing on the first day of the month following the month in
which gold production commences.
PRESIDENT'S OWNERSHIP OF MINERAL SAN SEBASTIAN S.A. DE C.V. (MISANSE)
COMMON SHARES
Prior proxy statements have detailed the circumstances in which the
President has acquired on December 10, 1993, the ownership of 203 Misanse
common shares. In addition, as of June 1995, he personally, for his own
account, purchased an additional 264 Misanse common shares from a Misanse
shareholder in an arms-length transaction. There are a total of 2,600
Misanse shares issued and outstanding. The Company has agreed in
connection with the issuance of the mining concession from the Government
of El Salvador not to exceed its 52% Misanse stock ownership.
<PAGE>
COLLATERAL PLEDGED TO SECURE THE PROMISSORY NOTES
The following collateral is held by Edward L. Machulak: (1) 2,002,037
shares of the Sanseb $0.10 par value common stock; (2) 1,346 Mineral San
Sebastian, S.A. de C.V. common shares, 100 colones par value; (3) 300
Homespan Realty Co., Inc. no par value common shares; (4) 1,800 Universal
Developers, Inc. no par value common shares; (5) 419,000 International
Property Exchange, Inc. $0.05 par value common shares; (6) one voting
membership certificate of San Luis Valley Irrigation Well Owners, Inc.;
(7) certificate no. 312 consisting of .001447 units of Augmentation Plan
Number One of San Luis Valley Irrigation Well Owners, Inc.; (8) 100 Ecomm
Group Inc., $0.10 par value common shares; (9) two Deeds of Trust to
Colorado Public Trustee granted by San Luis Estates, Inc. to Edward L.
Machulak are described as follows: one Deed of Trust is dated March 20,
1984, and includes four parcels of land; and the other Deed of Trust is
dated October 4, 1982, and consists of six parcels of land located in the
San Luis North Estates Subdivision, Costilla County, Colorado; (10) a
deed of trust (jointly held with a related company in which he is
involved) which contains approximately 331 acres of real estate known as
the "Standing Rock Campground" located in the Lake of the Ozarks, Camden
County, Missouri; (11) assignment with others, the concession granted to
Misanse which was assigned by Misanse to the Joint Venture; (12) all of
its current investment holdings; (13) all other miscellaneous assets
owned by the Company filed under the Uniform Commercial Code
requirements, and all other assets owned by the Joint Venture and/or its
subsidiaries; (14) the assignment and pledge with others all rights,
titles, claims, remedies, and interest held by the Commerce/Sanseb Joint
Venture which was formed on September 22, 1987; and (15) the cross-pledge
collateral rights.
(2) EDWARD L. MACHULAK ROLLOVER INDIVIDUAL RETIREMENT ACCOUNT (ELM RIRA)
As of March 31, 2000, the Company had borrowed an aggregate of $646,141,
including accrued interest, from the Company's President's ELM RIRA.
These loans are evidenced by the Company's open-ended, secured, on-demand
promissory note, with interest payable monthly at the prime rate plus 4%
per annum, but not less than 16% per annum.
The following collateral is held by the ELM RIRA: (1) assignment with
others, the concession granted to Misanse which was assigned by Misanse
to the Joint Venture; (2) the assignment and pledge of all the rights,
titles, claims, remedies, and interest held by the Commerce/Sanseb Joint
Venture which was formed on September 22, 1987; and (3) the cross-pledge
collateral rights.
(3) GENERAL LUMBER & SUPPLY CO., INC. ("GENERAL LUMBER")
Also with the consent and approval of the Directors, a company (General
Lumber) in which the President has a 55% ownership entered into the
following agreements, and the status is reflected as of March 31, 2000:
General Lumber has been issued an open-ended, secured, on-demand
promissory note by the Company amounts to $1,808,514 the annual interest
rate is 4% plus the prime rate, but not less than 16%, and it is payable
monthly.
The Company leases approximately 4,032 square feet on a month-to-month
basis for its corporate headquarters office; the monthly rental charge is
$2,789, and the annual amount charged for the past three fiscal years is
as follows: 2000, $33,468; 1999, $33,468; and 1998, $33,468.
General Lumber provides consulting, administrative services, use of data
processing equipment, use of its vehicles and other property as required
by the Company. Total charges for these services were as follows: 2000,
$7,320; 1999, $7,680; and 1998, $8,040.
In lieu of cash payments for the office space rental and for the
consulting, administrative services, etc., these amounts due are added
each month to General Lumber's open-ended, secured, on-demand promissory
note issued by the Company.
In addition, General Lumber does use its credit facilities to purchase
items needed for the Joint Venture's mining needs.
<PAGE>
The collateral specifically pledged to General Lumber securing the
promissory note(s) is as follows: (1) 48,645 San Luis Estates, Inc.
common shares, $0.50 par value; (2) a deed of trust issued jointly with
the President of the Company dated November 3, 1983, by and between
Homespan Realty Co., Inc., as party of the first part, which is a lien on
the 331-acre Standing Rock Campground located in Camdenton, Missouri; (3)
an interest with the President of the Company in an assignment and pledge
of all of the corporate assets and on all of its subsidiaries' assets
which has been filed under the Uniform Commercial Code requirements; (4)
assignment with others, the concession granted to Misanse which was
assigned by Misanse to the Joint Venture; (5) the assignment and pledge
with others of all rights, titles, claims, remedies, and interest held by
the Commerce/Sanseb Joint Venture which was formed on September 22, 1987;
and (6) the cross-pledge collateral rights.
The Company purchased from General Lumber during its fiscal year ended
March 31, 2000, on behalf of its Joint Venture, various items that it
required from time to time. These purchases are believed to have been at
a price and at terms equal to or better than generally offered to others.
In addition to the four-year stock option issued on January 10, 1997 to
purchase 68,000 of the Company's restricted common shares at a price of
three dollars per share, the Company, on July 12, 1999, in a compromise
of the extension of the promissory notes and credit from General Lumber,
issued to General Lumber two-year options to purchase 500,000 of its
restricted common shares at a price of fifty cents for each share.
(4) SYLVIA MACHULAK ROLLOVER INDIVIDUAL RETIREMENT ACCOUNT
As of March 31, 2000, the President's wife's Individual Retirement
Account ("IRA") has the Company's open-ended, secured, on-demand
promissory note in the sum of $384,290 which bears interest at an annual
rate of prime plus three percent, but not less than 16% and the interest
is payable monthly. On December 14, 1996, she acquired a four-year stock
option to purchase 83,900 of the Company's restricted common shares at a
price of $3.00 each which expires December 13, 2001. This stock option
transaction had the same terms as were entered into with other third
party arms-length transactions.
This IRA has as collateral the following: (1) 48,645 San Luis Estates,
Inc. common shares, $0.50 par value; (2) 12 lots located in Fort Garland,
Costilla County, Colorado; (3) 30 lots located in the San Luis North
Estates Subdivision, Costilla County; (4) assignment with others, the
concession granted to Misanse which was assigned by Misanse to the Joint
Venture; (5) assignment and pledge of all the rights, titles, claims,
remedies, and interest held by the Commerce/Sanseb Joint Venture which
was formed on September 22, 1987; and (6) the cross-pledge collateral
rights. On a personal basis, the President's wife has performed
consulting services for which payment has not been made since October 1,
1994. On September 16, 1994 the Directors adopted a resolution to
establish her compensation to be $2,800 per month to be continued until
such time that her consulting and advisory services are terminated.
(5) CROSS-PLEDGE COLLATERAL AGREEMENT
The President, Edward L. Machulak, as an individual and not as a Director
or Officer of the Company, the Edward L. Machulak Rollover Individual
Retirement Account, General Lumber, and the Sylvia Machulak Rollover
Individual Retirement Account, individually are entitled to specific
collateral that has been pledged to them by the Company, its
subsidiaries, affiliates, and the Joint Venture. Upon default by the
Company, or its subsidiaries, affiliates, or the Joint Venture, Edward L.
Machulak, the Edward L. Machulak Rollover Individual Retirement Account,
General Lumber, and the Sylvia Machulak Rollover Individual Retirement
Account have the first right to the proceeds from the specific collateral
pledged to each of them. The Company, its subsidiaries, its 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: Edward L. Machulak, the Edward L. Machulak Rollover Individual
Retirement Account, General Lumber, and the Sylvia Machulak Rollover
Individual Retirement Account. The purpose and the intent of the
cross-pledge of collateral is to assure Edward L. Machulak, the Edward L.
Machulak Rollover Individual Retirement Account, General Lumber, and the
Sylvia Machulak Rollover Individual Retirement Account, that each of them
would be paid in full; and, 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
Edward L. Machulak, the Edward L. Machulak Rollover Individual Retirement
Account, General Lumber, and the Sylvia Machulak Rollover Individual
Retirement Account, and then to divide the total debt into each
individual debt to establish each individual 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 due to each of them.
<PAGE>
(6) CANCELLATION OF THE INTER-COMPANY DEBTS UPON DEFAULT
Since part of the collateral pledged to Edward L. Machulak, the Edward L.
Machulak Rollover Individual Retirement Account, General Lumber, and the
Sylvia Machulak Rollover Individual Retirement Account is the common
stock of Homespan Realty Co., Inc., Ecomm Group Inc., San Sebastian Gold
Mines, Inc., San Luis Estates, Inc.; Mineral San Sebastian, S.A. de C.V.,
Universal Developers, Inc., and one hundred percent of the Company's
interest in the Commerce/Sanseb Joint Venture, the Company agreed, upon
default of the payment of principal or interest to any of the lenders
mentioned herein, that it will cancel any inter-company debts owed to the
Company by any of its wholly-owned subsidiaries or affiliates at such
time as any of the stock or Joint Venture ownership is transferred as a
result of default of any promissory note.
(7) GUARANTORS
The agreement among the lenders further confirms that the Company and all
of the following are guarantors of loans made to each of the lenders:
Commerce/Sanseb Joint Venture; Homespan Realty Co., Inc.; Ecomm Group
Inc., San Luis Estates, Inc.; San Sebastian Gold Mines, Inc.; and
Universal Developers, Inc. They jointly and severally guaranteed payment
of the note(s) that they caused to be issued and also agreed that these
note(s) may be accelerated in accordance with the provisions contained in
the agreement and/or any collateral or mortgage/deeds of trust securing
these notes. Also, the Company and all of its subsidiaries and
affiliates, including the Commerce/Sanseb Joint Venture, agreed to the
cross-pledge of the collateral for the benefit of Edward L. Machulak, the
Edward L. Machulak Rollover Individual Retirement Account, General
Lumber, and the Sylvia Machulak Rollover Individual Retirement Account.
(8) DIRECTORS' AND OFFICERS' TRANSACTIONS
The Directors, by their agreement, have deferred cash payment of their
Director fees beginning on January 1, 1981, until such time as the
Company's operations are profitable. In the past, Directors were allowed
to apply the payment for fees earned by them in exchange for the
Company's common shares. Said pricing of shares varied and were
dependent partially on the market value of the tradable common shares.
Beginning with October 1, 1996, the Director fees are $1,200 for each
quarterly meeting and $400 for the attendance of any other Directors'
meeting. The Executive Director fees beginning on October 1, 1996, were
fixed at $400 a meeting. The Director/President of the Company does not
receive any Director fees.
During March 2000, the Directors/Officers exercised their rights to
purchase 98,236 common shares, par value $0.10, at a price of $0.34 per
share. On February 14, 2000, at a regularly scheduled Directors'
meeting, the Directors adopted a resolution to use the average close
price of the Company's common shares during a period from January 3, 2000
through February 11, 2000 as a value for the common shares to be issued.
The Company borrowed 72,770 of the common shares from a Director pursuant
to a Director-approved, open-ended share loan agreement dated March 6,
1998. The sale of these shares took place during the fiscal year and all
of the net proceeds were received by the Company. The common shares
borrowed together with the 7,277 common shares earned for interest were
paid in October 1999 by the issuance to him of the Company's restricted
common shares.
<PAGE>
(9) MACHULAK, HUTCHINSON, ROBERTSON & O'DESS, S.C. ("LAW FIRM")
The Law Firm which represents the Company in which a son of the President
is a principal is owed as of March 31, 2000, the sum of $260,926 for
1,739 hours of legal services rendered since July 1980. The amount due
is based on the present current hourly rate charged by the Law Firm to
the Company. By agreement, these fees are to be adjusted to commensurate
with the hourly fees charged by the Law Firm on the date of payment of
this obligation.
The Company issued to the son of the President and his wife an
open-ended, on-demand promissory note in the sum of $81,420 which bears
interest at an annual rate of 16% payable monthly. The Company borrowed
from them 41,460 common shares. These shares were sold on behalf of the
Company and the Company received all of the proceeds. Pursuant to the
terms of a Director-approved loan agreement, these shares, plus the 4,146
common shares earned for the payment of interest, amount to a total of
45,606 restricted common shares which were paid to them during May 1999
by issuing the Company's restricted common shares.
(10) INTERACTIVE BUSINESS CHANNEL, INC. (IBC) AND MR. MATTHEW MARCUS
LAWSUIT
On June 14, 2000, Commerce Group Corp.'s legal counsel filed a complaint
in the State of Wisconsin, Circuit Court, Milwaukee County, Case No.
00CV004805, Money Judgment: 30301, on behalf of Ecomm Group Inc. (a
51%-owned Commerce Group Corp. subsidiary) and Commerce Group Corp., as
plaintiffs, against Interactive Business Channel (IBC) and Matthew
Marcus, as an individual, both of Irvine, California, as defendants.
Included in this complaint are the following three causes of action: the
first cause of action is the breach of contract; the second cause of
action is the breach of fiduciary duty; and the third cause of action is
the rescission of the contract and return of compensation.
The plaintiffs demand judgment against the defendants as follows: for
actual damages in an amount to be determined at trial; for punitive
damages in an amount to be determined at trial; for rescission of the
transaction and return to the plaintiffs of 49% of the common stock of
Ecomm Group Inc. represented by 96 common shares and for the return of
500,000 Commerce Group Corp. common shares, par value ten cents per
share, issued as compensation for the services of IBC and Mr. Matthew
Marcus; and for actual attorney's fees, the costs and disbursements of
this action, and any further relief the Court deems equitable and just.
A copy of the said complaint was filed electronically as Exhibit A to the
Company's Securities and Exchange Commission Form 8-K on June 29, 2000.
(11) INTERCOMPANY TRANSACTIONS AND OTHER TRANSACTIONS
(a) In addition to the transactions between the Company and General
Lumber, and certain individuals who also are Directors and Officers
of the Company and between the Company and its Officers, Directors
and affiliates, the Company has had transactions with its
subsidiaries, San Luis Estates, Inc., Universal Developers, Inc.,
Homespan Realty Co., Inc., Ecomm Group Inc., San Sebastian Gold
Mines, Inc., Mineral San Sebastian S.A. de C.V., and substantial
transactions with the Commerce/Sanseb Joint Venture.
(b) The Company formerly advanced funds, allocated and charged its
expenses to the Joint Venture. The Joint Venture in turn
capitalized all of these advances, allocations and expenses.
The Company changed its consolidation policy as of April 1, 1998 to
include the assets, liabilities, equity and the income and expenses
of its Joint Venture rather than show it as an investment on the
balance sheet. The consolidated balance sheets for March 31, 2000
and 1999 and the consolidated statements of changes in shareholders'
equity, consolidated statements of cash flows and consolidated
statements of operations for the years ended March 31, 2000, 1999
and 1998 reflect the restated financial statements. Reference is
made to the Company's financial statements for a detailed
explanation.
<PAGE>
The Company has adopted a policy to maintain a separate accounting
of the amount due to it from Sanseb and the Joint Venture. This
independent accounting will be maintained by the Company to reflect
its investment and the amount due to it. This record will become
the official document for future Joint Venture cash distributions.
All of the advances and interest earned will be paid to the Company
before the distribution of any of the Joint Venturer's profits or
cash flow.
(c) The Company maintains a separate accounting for the funds or credits
advanced to the Joint Venture and for the interest charged which is
at the prime rate quoted on the first business day of each month
plus four percent and said interest is payable monthly. These
advances, together with interest, are to be paid to the Company
prior to the distribution of any of the Joint Venture profits.
COMPANY NET ADVANCES TO THE JOINT VENTURE
-----------------------------------------
Total Advances Interest Charges
-------------- ----------------
Balance April 1, 1990 $ 1,625,163 $ 252,060
Year Ended March 31, 1991 718,843 266,107
Year Ended March 31, 1992 698,793 312,004
Year Ended March 31, 1993 1,003,617 347,941
Year Ended March 31, 1994 1,155,549 451,180
Year Ended March 31, 1995 2,884,078 751,389
Year Ended March 31, 1996 3,122,766 1,286,739
Year Ended March 31, 1997 3,894,692 1,567,375
Year Ended March 31, 1998 4,397,007 2,179,731
Year Ended March 31, 1999 3,653,481 2,590,144
Year Ended March 31, 2000 4,192,249 3,044,915
----------- -----------
$27,346,238 $13,049,585
Advances by three of the Company's
wholly-owned subsidiaries 590,265 0
----------- -----------
Total Net Advances March 31, 2000 $27,936,503 $13,049,585
=========== ===========
(d) TRANSACTIONS WITH PENSION OR SIMILAR PLANS
During December 1983, the Company's Board of Directors authorized the
Company to establish a Cash or Deferred Profit Sharing Plan and Trust to
meet the requirements for a qualified employee benefit plan as set forth
in Section 401 et seq of the 1954 Internal Revenue Code, Section 401(k)
and further authorized that, in lieu of cash, certain assets could be
placed in this plan for those who qualify. Since all of the Company's
assets are pledged as collateral in connection with outstanding loans,
and because of the Company's limited cash position, this plan was not
effected, however it is intended to effectuate the plan as soon as it is
able to fund it or make other amenable arrangements.
(e) TRANSACTIONS WITH PROMOTERS
The Company has entered into several consulting agreements with finders
of funds. These finders may be deemed to be promoters. Reference is
made to the contractual arrangements entered into by and between the
Company, Ecomm Group Inc. and Interactive Business Channel, Inc., on
January 27, 1999 and amended on May 25, 1999; copies were electronically
filed with the Securities and Exchange Commission. Reference is made to
pages 3 and 14 of this proxy statement.
(f) TERMINATION OF EMPLOYMENT-NONE
<PAGE>
(g) COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and related
Securities and Exchange Commission rules require that directors,
executive officers and beneficial owners of 10% or more of any class of
equity securities report to the Securities and Exchange Commission
changes in their beneficial ownership of the Company's shares and that
any late filings be disclosed.
The Company believes that each Director and/or Officer has not
intentionally been remiss in filing Securities and Exchange Commission
Forms 3, 4, or 5 and amendments thereto on a timely basis during the
fiscal year ended March 31, 2000. The Company is not responsible for
incorrect information supplied to it by its Directors or Officers in
regard to compliance with Section 16(a) of the 1934 Act.
PROPOSAL NO. 2--RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANT
The Board of Directors selected Bruce Michael Redlin, certified public
accountant as the Company's independent accountant for the fiscal year
ended March 31, 2001. Shareholders will be asked to ratify the selection
of Bruce Michael Redlin at the Annual Meeting. Ratification will require
the favorable vote of the holders of a majority of the common stock
represented and voting at the Meeting. Although ratification of the
accountant by the shareholders is not legally required, the Company's
Board of Directors believes such ratification to be in the best interest
of the Company. If the shareholders do not ratify this appointment,
other firms of certified public accountants will be considered by the
Board of Directors. Bruce Michael Redlin was the Company's independent
accountant for the fiscal year ended March 31, 2000. Mr. Bruce Michael
Redlin has been conducting audits for the Company beginning with the year
ended March 31, 1982. He is expected to attend the Annual Meeting with
the opportunity to make a statement if he desires or is required to do so
and he, or a representative, will be available at that time to respond to
appropriate questions. The Directors recommend that the shareholders
vote FOR such ratification. Proxies solicited by the Directors will be
so voted unless shareholders specify in their proxies a contrary choice.
SHAREHOLDERS' PROPOSAL FOR NEXT ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the next annual
meeting of shareholders, expected to be held on October 19, 2001 must be
received at the office of the Secretary of the Company by January 10,
2001, if such proposal is to be considered for inclusion in the Company's
proxy statement and form of proxy relating to that meeting.
ANNUAL REPORT
The Company's fiscal year ended March 31, 2000 Annual Report to
Shareholders has been mailed to shareholders concurrently herewith, but
such report is not incorporated in this Proxy Statement and is not deemed
to be a part of this proxy solicitation material.
On or about June 9, 2000, the Company filed with the Securities and
Exchange Commission its Annual Report on Form 10-K. This Report contains
detailed information concerning the Company and its operations,
supplementary financial information and certain schedules which, except
for exhibits, are included in the Annual Report to Shareholders. A copy
of the Annual Report will be furnished without charge upon written
request to: Investor Relations, Commerce Group Corp., 6001 North 91st
Street, Milwaukee, Wisconsin 53225. Also, all reports filed with the
U.S. Securities & Exchange Commission can be obtained from the following
website: http://www.sec.gov/cgi-bin/srch-edgar?0000109757.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the Company. In
addition to use of the mails, certain officers, directors and employees
of the Company, without receiving additional compensation, may solicit
proxies personally by telephone or facsimile. The Company may reimburse
persons holding shares in their own names or in the names of their
nominees for expenses they incur in obtaining instructions from
beneficial owners of such shares.
<PAGE>
OTHER MATTERS
Management knows of no other business to be presented at the Meeting, but
if other matters do properly come before the Meeting, it is intended that
the persons named in the proxy will vote on said matters in accordance
with their best judgment. The above Notice, Proxy Statement and Form of
Proxy are sent by Order of the Board of Directors. The Directors urge
you to attend this meeting and if you are not able to attend, please
submit your proxy. Your interest and cooperation is greatly appreciated.
/s/ Edward A. Machulak
Edward A. Machulak
Executive Vice President
and Corporate Secretary
August 23, 2000
<PAGE>
PROXY COMMERCE GROUP CORP. PROXY
6001 NORTH 91ST STREET
MILWAUKEE, WISCONSIN 53225-1795
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward L. Machulak and Edward A. Machulak
as Proxies each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the
shares of common stock of Commerce Group Corp. held of record by the
undersigned on August 23, 2000, at the annual meeting of shareholders to
be held on October 20, 2000, or any adjournment or adjournments thereof.
1. Directors recommend a vote for election of the following Director:
EDWARD A. MACHULAK, Class II Director, term expiring at the 2003
Annual Shareholders' Meeting
__________ FOR __________ WITHHOLD AUTHORITY
2. Proposal to approve the appointment of BRUCE MICHAEL REDLIN as
independent public accountant of the corporation.
__________ FOR __________ AGAINST _________ ABSTAIN
3. In their discretion on any other matter which may properly come
before the meeting or any adjournment or adjournments thereof.
(Continued and to be signed on reverse side)
<PAGE>
(Continued from other side)
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this
proxy will be voted for the election of the listed director, and for the
appointment of Bruce Michael Redlin as independent public accountant of
Commerce Group Corp.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign as full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated __________________________________2000
___________________________________________
Signature
___________________________________________
Signature if held jointly
(Please mark, sign, date and return the proxy card promptly, using the
enclosed envelope.)
<PAGE>
