EXHIBIT 99.4
COMMERCE GROUP CORP.
0000 Xxxxx 00xx
Xxxxxx,
Xxxxxxxxx, XX
00000-1795
414/000-0000 Fax
414/462-5312
AND/OR
COMMERCE/SANSEB
JOINT VENTURE
(Joint Venture)
AND/OR HOMESPAN REALTY CO., INC. (Homespan)
AND/OR ECOMM GROUP INC. (Ecomm)
AND/OR SAN XXXX ESTATES, INC. (SLE)
AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)
AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)
ALL LOCATED AT THE SAME ADDRESS
May 14, 2001
Xxx. Xxxxxx Xxxxxxxx as an
Individual and for her Rollover
Individual Retirement Account
000 Xxxx Xxxxx Xxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxxx 00000
Dear Xxx. Xxxxxxxx:
At today's Commerce Group Corp. (Commerce) Directors' meeting, the Directors
were informed about the confirmation and status letter you requested from
Commerce and its affiliates to establish and confirm the amount due and the
collateral pledged to the Xxxxxx Xxxxxxxx Rollover Retirement Account (XX XXXX)
as of Commerce's fiscal year ended March 31, 2001. 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 Xxxxxx Xxxxxxxx
as an individual/consultant and the XX XXXX as of Commerce's fiscal year ended
March 31, 2001, which are as follows:
1. Promissory Notes and Other Obligations
A series of open-ended, secured, on-demand promissory notes (Notes) are
due to the XX XXXX. Their combined amount is $312,459.27 as of March
31, 2001. These Notes bear interest, payable monthly, at the rate of 3%
over the prime 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,
2001, Exhibit A)
2. Amounts Due to Xxxxxx Xxxxxxxx as an Individual (SM)
As of September 30, 2000, a sum of $201,600 (72 months at $2,800 per
month) is due to Xxxxxx Xxxxxxxx for consulting services rendered
pursuant to a Director resolution adopted on October 20, 2000. The
Directors further acknowledge the continuance of SM's services at a sum
of $3,000 per month beginning on October 1, 2000, and continuing until
such time as terminated by the Directors or the President. Therefore,
the amount due to SM as of March 31, 2001, is $219,600 (72 months at
$2,800 and six months at $3,000). Reference is made to Exhibit B
included in the April 5, 1996 confirmation letter. On December 14,
1996, Commerce issued a four-year stock option to the XX XXXX to
purchase 83,000 of its restricted common shares at a price of $3.00 per
share. This option was not exercised on or before the due date,
therefore, it expired. (Reference is made to Exhibit B in the April 14,
1997 confirmation letter.)
3. Transactions During the Fiscal Year with the XX XXXX, Commerce,
and its Subsidiaries
On August 14, 2000, the Directors, in order to reduce corporate debt,
authorized the Officers of the Company to negotiate the sale of its
non-income producing assets to the XX XXXX in exchange for the
reduction of debt owed to the XX XXXX. It was agreed to sell to the XX
XXXX, 43 parcels of land located in the San Xxxx North Estates
Subdivision, Xxxxxxxx County, Colorado, for a sum of $64,500; 12 lots
consisting of approximately one acre located in Fort Garland, Colorado
for the sum of $6,000; and 250,000 of the Company's restricted common
shares at a price of $.25 a share or $62,500. Pursuant to the
Directors' resolution, the following transactions were concluded: on
October 3, 2000, the XX XXXX consummated the purchase of the Xxxxxxxx
County parcels of land as described above; and on December 7, 2000, the
XX XXXX purchased 250,000 of the Company's restricted common shares at
a price of $.25 a share.
4. Collateral Pledged to the XX XXXX
The collateral specifically pledged to the XX XXXX is as follows:
a. A Deed of Trust executed by SLE on July 16, 1982, consisting
of 12 lots located in the Town of Fort Garland, Xxxxxxxx
County, Colorado, and recorded at 8:45 a.m. on May 18, 1984,
in Book 237, Page 658, Reception No. 156287. Reference is made
to Exhibit 2 in the April 9, 1990 confirmation letter. These
lots are included in the purchase consummated by the XX XXXX
pursuant to the Directors' approval dated August 14, 2000.
b. A Deed of Trust executed by SLE on May 27, 1983, consisting of
32 lots located in the San Xxxx North Estates Subdivision,
Xxxxxxxx County, Colorado, and recorded at 9:30 a.m. on May
31, 1983, in Book 709, Reception No. 152520. Reference is made
to Exhibit 3 in the April 9, 1990 confirmation letter. These
and other lots were purchased by the XX XXXX pursuant to
Directors' approval dated August 14, 2000.
c. A Collateral Pledge Agreement executed by Commerce on December
31, 1981 granted to the XX XXXX by Commerce pledging 48,645
SLE common shares, par value $0.50 a share, Certificate No.
25, dated December 31, 1981, together with a letter agreement
dated December 31, 1981. Reference is made to Exhibit 4 in the
April 9, 1990 confirmation letter.
d. General Lumber & Supply Co., Inc. (GLSCO), Xxxxxx X.
Xxxxxxxx (ELM), as an individual and not
as a Director or Officer of Commerce the Xxxxxx X.
Xxxxxxxx Rollover Individual Retirement
Account (ELM RIRA) and the XX XXXX 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 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 Xxxxxxx 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
4(a) included in the April 9, 1990
confirmation letter. Effective February 1996, the
Government of El Salvador approved a revised
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
herein mentioned.
5. Cross Pledge Collateral Agreement
GLSCO, ELM, the ELM RIRA and the XX XXXX 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 XX XXXX 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 XX XXXX. The purpose and the intent of the cross
pledge of collateral is to assure GLSCO, ELM, the ELM RIRA and the XX
XXXX, 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 XX XXXX, 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.
6. Cancellation of Inter-Company Debts Upon Default
Since part of the collateral pledged to GLSCO, ELM, the ELM RIRA and
the XX XXXX 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.
7. Guarantors
This agreement further confirms that Commerce and all of the following
are guarantors to the loans made by the XX XXXX to Commerce: Joint
Venture, Homespan, Ecomm, SLE, Sanseb and UDI. They jointly and
severally guarantee payment of the note(s) that they 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 XX XXXX. Reference is made
to Exhibit 5 included in the April 9, 1990 confirmation letter.
8. Re-Execution Agreement
In the event the XX XXXX deems that it is necessary or advisable for
the XX XXXX to have Commerce re-execute any document(s) entered into,
including, but not limited to the promissory note or collateral
agreement, Commerce will re-execute such document(s) reasonably
required by the XX XXXX. Commerce also acknowledges that Commerce may
be liable to pay certain costs related to any of the transactions
entered into with the XX XXXX. If at a later date the XX XXXX
determines that an error has been made in the payment of such costs to
the XX XXXX, then the XX XXXX may demand payment and Commerce does
hereby agree to make such payment forthwith. All requests for
corrections of any errors and/or payment of costs shall be complied
with by Commerce within seven (7) days of the XX XXXX'x written
request. The failure of Commerce to comply with Commerce's obligation
hereunder shall constitute a default and shall entitle the XX XXXX to
the remedies available for default under any provisions of the
agreements including, but not limited to the promissory note and/or the
collateral pledge agreement.
9. Omissions
Commerce believes that it has included all of its obligations, monies
due and has listed all of the collateral due to the XX XXXX, 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.
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/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
Secretary
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/ Xxxxxx X. Xxxxxxxx /s/ Xxxxxx X. Xxxxxxxx
------------------------------------ ------------------------------------
By: Xxxxxx X. Xxxxxxxx, Auth. Designe By: Xxxxxx X. Xxxxxxxx, President
ECOMM GROUP INC. SAN XXXX ESTATES, INC.
as Guarantor (Ecomm) as Guarantor (SLE)
/s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxxx X. Xxxxxxxx
------------------------------------ ------------------------------------
By: Xxxxxx X. Xxxxxxxx, President By: Xxxxxx X. Xxxxxxxx, President
SAN SEBASTIAN GOLD MINES, INC. UNIVERSAL DEVELOPERS, INC.
as Guarantor (Sanseb) as Guarantor (UDI)
/s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxxx X. Xxxxxxxx
------------------------------------ ------------------------------------
By: Xxxxxx X. Xxxxxxxx, President By: Xxxxxx X. Xxxxxxxx, President
Accepted by: Accepted by:
/s/ Xxxxxx Xxxxxxxx /s/ Xxxxxx Xxxxxxxx
------------------------------------ ------------------------------------
Xxxxxx Xxxxxxxx Rollover Individual Xxxxxx Xxxxxxxx as an individual
Retirement Account Date: May 14, 2001
Date: May 14, 2001
Exhibit A to Exhibit 99.4
(Schedule of Principal and Interest as of March 31, 2001
has been purposely omitted as it only reflects
the calculations of the principal and interest.)
