EXHIBIT 99.3
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
Xx. Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx Rollover
Individual Retirement Account
000 Xxxx Xxxxx Xxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxxx 00000
Dear Xx. Xxxxxxxx:
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 Xxxxxx X. Xxxxxxxx Rollover Individual Retirement
Account (XXX 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 the ELM RIRA, and the collateral pledged to the ELM RIRA as of Commerce's
fiscal year ended March 31, 2001, 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 $599,767.80 as of March 31, 2001. 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, 2001, Exhibit A).
On August 14, 2000, Commerce's Directors, in order to reduce corporate
debt and to provide liquidity to the ELM RIRA, adopted a resolution to
authorize the Officers of Commerce to sell to the ELM RIRA, a total of
600,000 of the Corporation's restricted common shares, $.10 par value,
at a price of twenty-five cents ($.25) each for a total sum of
$150,000.
The market price of the free trading common shares during the period
from April 1, 2000 through August 15, 2000 ranged from a low of $.16 to
a high of $.50 a share. On December 7, 2000, the payment of $150,000
was made to reduce the amount Commerce owed to the ELM RIRA.
In addition, the Directors authorized Commerce's Officers to negotiate
a sale of its non-income producing assets, in this case, precious
stones and jewelry, to the ELM RIRA at Commerce's book value of
$172,100 in exchange for a reduction of debt owed by Commerce to the
ELM RIRA.
2. Collateral Pledged to the ELM RIRA
General Lumber & Supply Co., Inc. (GLSCO), Xxxxxx X. Xxxxxxxx (ELM) as
an individual and not as a Director or Officer of Commerce, the ELM
RIRA and the Xxxxxx Xxxxxxxx Rollover Individual Retirement Account (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 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 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 2 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 mentioned
herein.
3. 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.
4. 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.
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 XX XXXX. Reference is made
to Exhibit 3 included in the April 9, 1990 confirmation letter.
6. Re-Execution Agreement
In the event the ELM RIRA deems that it is necessary or advisable for
the ELM RIRA 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 ELM RIRA. Commerce also acknowledges that Commerce may
be liable to pay certain costs related to any of the transactions
entered into with the ELM RIRA. If at a later date the ELM RIRA
determines that an error has been made in the payment of such costs to
the ELM RIRA, then the ELM RIRA 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 ELM RIRA's written
request. The failure of Commerce to comply with Commerce's obligation
hereunder shall constitute a default and shall entitle the ELM RIRA 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.
7. 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.
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:
/s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxx Rollover Individual
Retirement Account
Date: May 14, 2001
Exhibit A to Exhibit 99.3
(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.)
