MANTI HOLDINGS, INC.
March 7, 2008
Xx. Xxxxxx X. Xxxxxxxx, President
Commerce Group Corp.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Dear Ed:
The purpose of this letter is to state the general terms of the
understanding reached between Manti Holdings LLC ("Manti") and Commerce
Group Corp. ("Commerce").
1. $30,000 Option Payment:
-----------------------
Manti Resources will pay Commerce the sum of $30,000 for an
exclusive 30 day option period to conduct a more detailed review of
the San Sebastian Property.
2. $1,300,000 Equity Investment in Commerce:
-----------------------------------------
At the conclusion of the 30 day Option period Manti (or a
subsidiary) will have the right, subject to the approval of
Commerce's shareholders, to purchase 1,300,000 shares of Commerce's
common stock at $1.00 per share, or a total of $1,300,000. Xxxxx
understands that these shares will be restricted pursuant to the
rules of the SEC. The $1,300,000 payment would be made in
installments spread over six months, and will include:
a. $150,000 ($25,000 per month) for 6 months of Commerce's project
holding costs (in El Salvador),
b. $150,000 ($25,000 per month) for 6 months of Commerce's working
capital, at Commerce Group's discretion, and
c. $1,000,000 for short term project evaluation expenditures.
Manti will direct Commerce's use of these funds and in addition,
will provide project management resources. Manti expects that
these funds will be used for resource evaluation/development
drilling ($625,000), contract geologic services and management
($100,000), technical evaluation of Commerce's San Xxxxxxxxx
Mill ($25,000), land tenure and political risk review and
assessment ($25,000), permits and environmental regulations
review ($25,000), metallurgical studies ($25,000),
prefeasibility scoping study ($75,000), district scale geologic
evaluation, ($50,000), and district scale geophysics, air photo
& satellite imaging ($50,000).
3. Manti's Option after Six Month Evaluation:
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By the end of the six months described in paragraph 2, Xxxxx will
decide whether to acquire the San Sebastian assets owned by
Commerce. These assets include Commerce's interests in San
Sebastian Gold Mine, Inc, the New San Sebastian Gold Mine
Exploitation Concession/license, the New San Sebastian Gold Mine
Exploration Concession, the Nueva Esparta Exploration Concession,
the mill facilities, the SCMP lease, real estate at the Modesto and
Xxxxxxxxxx Mines and any other related El Salvadoran assets held by
Commerce. In order to exercise this second option Xxxxx will pay
Commerce the sum of $2,000,000 and commit to the following:
a. Manti will spend $4,000,000 over a period of two years after
exercising the option to purchase to secure a positive bankable
feasibility study. If Xxxxx fails to spend this $4,000,000 over
the two year period after exercising the option to purchase, the
balance would be paid to Commerce. Commerce will not be obliged
to contribute to Xxxxx's expenditures.
P.O. Box 2907 . Corpus Christi, Texas 78403 . Office: (000) 000-0000 .
Fax: (000) 000-0000 . xxxx@xxxxxxxx.xxx
x. Xxxxx will pay Commerce 10% of the Net Smelter Return ("NSR")
paid from initial production up to the sum of $15,000,000;
x. Xxxxx will pay Commerce 3% NSR paid after the initial royalty of
$15,000,000 is reached. This royalty will increase to 4% NSR at
such a time when the gold price exceeds $1,200 per ounce,
indexed by the current gold price and a mutually agreed to cost
index
4. Manti has already sent Commerce a check in the amount of $30,000.
Within the next 30 days, Xxxxx will be sending you a Letter of
Intent for your shareholder approval.
Best Regards.
Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
