EXHIBIT 99.2

                              COMMERCE GROUP CORP.
                               6001 NORTH 91ST ST.
                            MILWAUKEE, WI 53225-1795
                         414-462-5310 . FAX 414-462-5312
                        E-MAIL info@commercegroupcorp.com
                        WEBSITE www.commercegroupcorp.com


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 10, 2004


Mr. Edward L. Machulak
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 along with any other Commerce  obligations or agreements made
to Edward L. Machulak (ELM and/or Lender) as an individual and not as a Director
or Officer of Commerce or its subsidiaries or as the authorized  designee of the
Joint  Venture  as of  Commerce's  fiscal  year  ended  March 31,  2004.  Today,
Commerce's Directors, by unanimous consent, approved, ratified and confirmed the
contents of this letter and  authorized me to submit its  understanding  of your
status, which is as follows:

1.   Promissory Notes and Other Obligations

     a.  An open-ended, secured, on-demand promissory note (Note) dated
         October 1, 1989 in which all of the prior promissory notes were
         consolidated into this single Note amounted to $490,217.19 as of
         that date.  All future advances and interest, not paid, are
         added to this Note.  This Note, together with cash and other
         advances and interest as of March 31, 2004, amounts to
         $6,565,816.75.  This Note bears interest, payable monthly, at
         the rate of 2% 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, 2004, Exhibit A).
         Commerce is no longer issuing monthly promissory notes for the
         payment of interest, etc., but pursuant to our understanding,
         Commerce is augmenting all additions and advances made by ELM,
         and it will deduct any payments or credits made by Commerce to
         the current open-ended, secured, on-demand, outstanding
         promissory note( s) issued or obligations owed to ELM.


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Mr. Edward L. Machulak
May 10, 2004
Page 2 of 12 Pages

     b.  Salaries, vacation pay

         In addition,  Commerce owes ELM the following for accrued  salaries and
         vacation:
                                                   Annual
                    Period                Years    Salary       Total
                    ------                -----    ------       -----
         April 1, 1981 - March 31, 1992   11.00   $ 67,740   $  745,140
         April 1, 1992 - Sept. 30, 1996    4.50   $114,750      516,375
         Oct. 1, 1996 - March 31, 2004     7.50   $165,000    1,237,500
                                          -----              ----------
          Balance                         22.00              $2,499,015


                 Vacation Pay             Months   Payment
                 ------------             ------   -------
         April 1981 - March 31, 2004         23   $ 13,750      316,250
                                                             ----------
          Total Due                                          $2,815,265

         At Commerce's  Annual Board of  Directors'  Meeting held on October 19,
         2001, the Directors adopted a resolution to compensate ELM for vacation
         pay based on one month for each year of service  beginning  on April 1,
         1981, and also the following resolution, which in part states:

              "BE IT FURTHER RESOLVED, That the Directors agreed that on the day
         the compensation will be paid to Edward L. Machulak, an adjustment will
         be made to compensate him for the loss of the dollar  purchasing  value
         caused by inflation and other economic factors;"

     c.  ELM Bonus agreement

         On February 16, 1987, by a Consent  Resolution of all of the Directors,
         ELM was awarded as a bonus compensation, the following: for a period of
         20 years,  commencing the first day of the month following the month in
         which  Commerce  begins to  produce  gold from its El  Salvadoran  gold
         mining operations, Commerce will pay annually to ELM, 2% of the pre-tax
         profits earned from these  operations.  Reference is made to Exhibit 11
         included in the April 9, 1990 confirmation letter.

     d.  Share loans

         To infuse funds into Commerce,  Commerce borrowed ELM's Commerce shares
         and ELM sold these  shares as  designee  for  Commerce's  benefit  with
         Commerce receiving all of the proceeds. For these share loans, Commerce
         has agreed to


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Mr. Edward L. Machulak
May 10, 2004
Page 3 of 12 Pages

         pay ELM  interest at the rate of prime plus 3%,  payable  monthly  with
         Commerce's  restricted  common shares and based on the Commerce  shares
         due to ELM.  Interest is also due and payable  monthly with  Commerce's
         restricted common shares for the shares pledged by ELM as collateral to
         others, all for the Company's interest and benefit. All share loans and
         interest  are to be paid  annually  on or  before  March  31 of each of
         Commerce's  fiscal years.  An accounting of the Commerce  common shares
         due and/or  paid to ELM as of March 31,  2004,  pursuant to a series of
         Director-approved,  open-ended,  on-demand  loan  and  promissory  note
         agreements by and between Commerce and ELM dated April 1, 1990, May 17,
         1989,  October 14, 1988 and June 20, 1988,  and for certain  continuous
         loans  and/ or pledges of ELM's  securities  that have taken  place and
         continued  to occur  during the fiscal  year ended March 31, 2004 is as
         follows:

         1.  Share loans                                         None
         2.  Interest shares due on shares pledged to banks
             for an open line of credit                          None
         3.  Interest shares due on shares sold for the
             benefit of Commerce                                 None
             Total Commerce restricted common shares paid
             and issued as of March 31, 2004 to ELM              None

     e.  Open ended loan agreements

         Reference is made to four Director-approved, open-ended loan agreements
         dated June 20, 1988,  October 14, 1988, May 17, 1989 (Exhibits B, C and
         D of the  April  12,  1993,  confirmation  letter)  and  April 1,  1990
         (Exhibit 2 of the April 9, 1990 confirmation letter).

     f.  Misanse share ownership disclosure

         On  October  23,  1993,  in  order  to  comply  with  the  El  Salvador
         Government's minimum capital requirements,  the shareholders of Mineral
         San  Sebastian  S.A.  de C.V.  (Misanse)  voted to  increase  Misanse's
         capitalization  from  119,500  colones  to  260,000  colones.  This was
         accomplished  via a  shareholders'  rights  offering  on the  basis  of
         purchasing  one share for each share owned with the rights  expiring on
         December 10,  1993.  According  to  Misanse's  by-laws,  the rights not
         exercised would be offered  proportionately to the shareholders who did
         exercise their rights.

         In addition to the rights offering, the Misanse shareholders authorized
         the sale of 210 additional  common shares to the following:  ten shares
         to each of the four officers/directors (40 shares), five shares to each
         of the remaining six


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Mr. Edward L. Machulak
May 10, 2004
Page 4 of 12 Pages


         directors  (30 shares),  three  shares to each of the ten  supplemental
         directors (30 shares), (the President and the Secretary of the Company,
         who are directors of Misanse,  had the right and they purchased ten and
         three  shares  respectively),  and 110 shares  were sold to the Company
         over and above the  amount of shares it was  entitled  to by the rights
         offering so that it would retain its 52%  ownership  after the issuance
         of the shares under the rights offering.  When the Company obtained the
         concession  in  1987,  it  agreed  with  the El  Salvador  Ministry  of
         Economy's  office  not  to  increase  its  52%  ownership  of  Misanse.
         Therefore,  after the rights offering,  the Company owned approximately
         52%.

         On the closing date of December 10, 1993 of this rights offering, there
         were 264 shares that were not  subscribed  and  purchased.  The Company
         would have been  entitled to purchase 137 shares (264 x 52%).  However,
         the Company had been  prohibited  to purchase  these shares as it would
         have exceeded its 52% ownership of Misanse shares.  The 137 shares were
         acquired  by ELM  with  prior  approval  of  Commerce's  directors.  He
         acquired  an  additional  four  shares by  virtue of his  proportionate
         ownership in the remaining unsold shares.  A Misanse  Director-approved
         drawing was held to sell the unsubscribed shares. In order to close the
         sales,  52 shares were  purchased  by ELM which he agreed in writing to
         hold these shares in escrow for a period of one year for the purpose of
         providing certain named El Salvador Misanse shareholders time to obtain
         funds to purchase these shares at his cost.  None were purchased by the
         Misanse shareholders.

         During June 1995,  ELM  personally  purchased an additional 264 Misanse
         common shares from a Misanse shareholder in an arms-length transaction.
         Therefore  ELM presently  owns a total of 467 Misanse  common shares or
         approximately  17.96% of the total 2,600  Misanse  common shares issued
         and outstanding.

2.   Collateral Pledged

     The  collateral  specifically  pledged to ELM or as  otherwise  noted is as
     follows:

     a.  A Collateral Pledge Agreement dated October 14, 1981 granted to
         ELM by Commerce pledging the following collateral:  2,002,037
         shares of Sanseb common stock, par value $0.10 per share and
         1,346 shares of Mineral San Sebastian, S.A. de C.V. common
         stock, par value one hundred colones ($11.43) per share.  The
         shares pledged are as follows:  the 618 shares originally owned
         by Commerce, and the 618 shares plus 110 shares purchased from
         the October 23, 1993 Misanse rights offering.  Reference is made
         to Exhibit 4 included in the April 9, 1990 confirmation letter.


<PAGE>

Mr. Edward L. Machulak
May 10, 2004
Page 5 of 12 Pages


     b.  A Collateral Pledge Agreement dated February 24, 1983, by Commerce, SLE
         and  UDI   collectively  and   individually,   pledging  the  following
         collateral:

         300 shares of no par value common shares of Homespan (formerly known as
         Trade  Realty Co.,  Inc.),  Certificate  No. 7 dated  January 21, 1974,
         being 100% of its issued and outstanding shares.  Homespan and Commerce
         agree that no  additional  shares of Homespan will be issued as long as
         there  are any  obligations  due to ELM;  1,800  shares of no par value
         (UDI)  capital  stock  Certificate  No. 17 dated  September  15,  1972,
         representing  100%  of the  shares  issued  and  outstanding.  UDI  and
         Commerce agree that no additional  shares of UDI will be issued as long
         as there are any outstanding  obligations due to ELM. Reference is made
         to Exhibit 5 included in the April 9, 1990 confirmation letter.

     c.  Collateral  Pledge  Agreement  dated July 13,  1983  granted to General
         Lumber & Supply Co., Inc. (GLSCO) and ELM by Commerce,  SLE, and Ecomm,
         individually and collectively, pledging the following collateral:

         One voting membership certificate of San Luis Valley Irrigation
         Well Owners, Inc., Membership Certificate No. 871, dated
         November 27, 1979;

         Certificate No. 312, Membership No. 871, consisting of .001447
         units of Augmentation Plan Number One of San Luis Valley
         Irrigation Well Owners, Inc. dated February 8, 1980;

         100  common  shares  of  $0.10  par  value,   Piccadilly  (now  Ecomm),
         Certificate  No. 1, dated July 23, 1974.  Ecomm and Commerce agree that
         no  additional  shares of Ecomm will be issued as long as there are any
         outstanding  obligations  due to ELM.  Reference  is made to  Exhibit 6
         included in the April 9, 1990 confirmation letter.

     d.  A Deed of Trust dated November 3, 1983 by and between Homespan,
         as party of the first part, and Ronald K. Carpenter, Esq.
         (Trustee), as party of the second part, for the benefit of ELM
         and GLSCO, as party of the third part.  The Deed of Trust is in
         favor of ELM and GLSCO and is open-ended to secure the
         promissory note(s) due to ELM and GLSCO and to further secure
         any future obligations that Commerce or Homespan may incur from
         them.  This Deed of Trust is issued to Ronald K. Carpenter,
         Esq., Trustee for the benefit of ELM and GLSCO and is a first
         lien on the 331-acre Standing Rock  Campground located in
         Camdenton, Missouri.  The Deed of Trust was recorded on November
         5, 1984 in Camden County, Missouri at 1:24 p.m. in Book 122,

<PAGE>

Mr. Edward L. Machulak
May 10, 2004
Page 6 of 12 Pages


         Page 200.  Reference is made to Exhibit 7 included in the April 9, 1990
         confirmation  letter. On August 14, 2000, with the Directors' approval,
         this property, via an agreement, was conveyed to GLSCO in consideration
         of the  cancellation  of $1,249,050 of debt owed to GLSCO and for other
         consideration contained in the said agreement.

     e.  Commerce/Sanseb Joint Venture (Joint Venture)

         Commerce  and Sanseb agree that ELM (the other  Lenders  were  included
         later) has as  collateral,  the  assignment  and pledge of all of their
         rights, titles, claims,  remedies, and interest whatsoever in the Joint
         Venture  which  was  formed  on  September  22,  1987.  In the event of
         default,  whatever  interest  Commerce  and  Sanseb  have in the  Joint
         Venture will be transferred to ELM and it will include  whatever assets
         are owned by the  Joint  Venture,  including,  but not  limited  to the
         precious metal ore reserves. Reference is made to Exhibit C included in
         the April 8, 1991 confirmation letter.

     f.  Uniform Commercial Code Filing - all other specific assets

         ELM's  interest  with GLSCO in filing  financing  statements  under the
         Uniform  Commercial  Code by an assignment  and pledge of all corporate
         assets,  such as but not  limited to the  property of  Commerce,  Joint
         Venture,  SLE, and Homespan,  wherever located,  now owned or hereafter
         acquired is as follows:  all accounts,  all land contract  receivables,
         contract  rights,  instruments  and chattel paper;  all inventory,  all
         jewelry and precious stones,  and all documents  relating to inventory,
         including  all  goods  held for  sale,  lease or  demonstration,  to be
         furnished  under  contracts  of  service,  and raw  materials,  work in
         process and  materials and supplies used or consumed in the business of
         Commerce,  the Joint Venture, SLE, and Homespan;  all office furniture,
         fixtures and all other equipment;  all general  intangibles,  all stock
         and securities of any kind, and all rights,  titles and interest in the
         Commerce Group Corp./San Sebastian Gold Mines, Inc. Joint Venture,  and
         all additions and  accessions  to, all spare and repair parts,  special
         tools, equipment and replacements for all returned or repossessed goods
         the sale or lease of which gave rise to, and all  proceeds and products
         of the  foregoing.  Reference is made to the  Wisconsin  Department  of
         Financial  Institutions  Uniform  Commercial  Code filing,  Exhibit 10,
         included in the April 9, 1990  confirmation  letter,  the renewed UCC-1
         filing on December 23, 1996,  Exhibit B, included in the April 14, 1997
         confirmation letter, and the UCC-4 continuation filing on June 27, 2001
         at  8:55  a.m.,  Filing  #02078155  (Exhibit  B of  the  May  13,  2002
         confirmation letter).

<PAGE>
Mr. Edward L. Machulak
May 10, 2004
Page 7 of 12 Pages


     g.  Acknowledgement of previously recorded collateral provided to
         the Lenders

         Historical information - San Sebastian Gold Mine Concession

         GLSCO,  ELM,  the Edward L.  Machulak  Rollover  Individual  Retirement
         Account  (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 the Joint Venture, and
         to the mine  concession  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  (SSGM)
         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 9 included in the April 9, 1990 confirmation letter.

         The following  collateral has been  previously  assigned to the Lenders
         pursuant to resolutions adopted by the Directors:

         (1) Commerce/Sanseb Joint Venture (Joint Venture)

             Both Commerce and San Sebastian Gold Mines, Inc. have
             assigned all of the rights, title, claims, remedies and
             interest that each has in the Joint Venture to the Lenders.
             Reference is made to Historical information - San Sebastian
             Gold Mine Concession.

         (2) New SSGM Exploration  Concession/License  (New SSGM)  approximately
             40.7694 square kilometers (10,070 acres)

             On October 20, 2002,  the Company  applied for the New SSGM,  which
             covers an area of 42 square  kilometers and includes  approximately
             1.2306 square  kilometers  of the Renewed SSGM.  The New SSGM is in
             the  jurisdiction  of  the  City  of  Santa  Rosa  de  Lima  in the
             Department of La Union and in the Nueva  Esparta in the  Department
             of Morazan,  Republic of El Salvador,  Central America. On February
             24, 2003,  the El Salvador  Department  of  Hydrocarbons  and Mines
             (DHM) issued the New SSGM for a period of four years  starting from
             the date following the  notification of this  resolution  which was
             received  on March 3, 2003.  The New SSGM may be  extended  for two
             two-year periods, or for a total of eight years.

<PAGE>

Mr. Edward L. Machulak
May 10, 2004
Page 8 of 12 Pages


             Besides the San Sebastian Gold Mine, three other formerly operative
             gold and silver  mines  known as the La Lola Mine,  the Santa Lucia
             Mine,  and the  Tabanco  Mine are  included in the New SSGM and are
             being explored.  The Company has complied as required by filing its
             annual  activity  report and it paid the annual  surface tax.  This
             concession  had been  assigned  collectively  to all of the Lenders
             named herein on May 12, 2003 and the assignment was included in the
             May 12, 2003 confirmation agreement as Exhibit B.

         (3) Lease agreement by and between Mineral San Sebastian
             Sociedad Anomina de Capital Variable (Misanse) and Commerce
             dated January 14, 2003

             The term of this  lease  agreement  coincides  with the term of the
             Renewed  San  Sebastian  Gold  Mine  Exploitation   Concession  and
             consists of 1,470 acres owned by Misanse.  This lease agreement has
             been  assigned to all of the Lenders  named  herein on May 12, 2003
             and the  assignment  was included in the May 12, 2003  confirmation
             agreement as Exhibit B.

     h.  Acknowledgment of collateral provided during the current fiscal
         year March 31, 2004

         Commerce's  Directors  have on May 10,  2004  authorized  and  directed
         Commerce's  Officers  to  assign  all of the  rights,  titles,  claims,
         remedies and interest it has to GLSCO,  ELM, the ELM RIRA,  the SM RIRA
         and SM,  collectively  and  individually  referred  to as  Lenders,  as
         collateral for all of the outstanding loans and obligations as of March
         31, 2004, including all future advances of any kind as follows:

         (1) Renewed San  Sebastian  Gold Mine  Exploitation  Concession/License
             (Renewed  SSGM)  -  approximately  1.2306  square  kilometers  (304
             acres),  Department  of La  Union,  El  Salvador,  Central  America
             (pledged and assigned as collateral on May 10, 2004)

             On  September  6, 2002,  at a meeting  held with the El  Salvadoran
             Minister  of  Economy  and the DHM,  it was  agreed  to  submit  an
             application  for  the  Renewed  SSGM  for a  30-year  term  and  to
             simultaneously  cancel the concession obtained on July 23, 1987. On
             September 26, 2002, the Company filed this application. On February
             28, 2003  (received  March 3, 2003) the DHM admitted to the receipt
             of the application and the Company proceeded to file public notices
             as required by Article 40 of the El  Salvadoran  Mining Law and its
             Reform (MLIR). On April 16, 2003, the Company's El Salvadoran legal
             counsel filed with the DHM notice that it believed that it complied
             with the requirements of Article 40, and that there

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Mr. Edward L. Machulak
May 10, 2004
Page 9 of 12 Pages


             were no objections;  and requested that the DHM make its inspection
             as required by MLIR  Article 42. The Company  then  provided a bond
             which was required by the DHM to protect third parties  against any
             damage  caused from the mining  operations,  and it  simultaneously
             paid the annual  surface  tax. On August 29, 2003 the Office of the
             Ministry  of  Economy  formally  presented  the  Company  with  the
             twenty-year  Renewed  SSGM which was dated  August 18,  2003.  This
             Renewed  SSGM  replaces the  collateral  that the same parties held
             with the previous  concession.  A copy of the assignment  dated May
             10, 2004, is attached to this document  (Exhibit B) and the Renewed
             SSGM agreement is attached to it and referred to as Exhibit 1.

         (2) San Cristobal Mill and Plant (SCMP) three-year lease by and between
             Commerce and Corporacion  Salvadorena de Inversiones (Corsain),  an
             El Salvadoran  governmental  agency,  executed on Monday, April 26,
             2004,  retroactive  to November 13,  2003.  Pledged and assigned as
             collateral on May 10, 2004.

             The renewed three-year SCMP lease for the property located near the
             City of El Divisadero  was finalized and executed on Monday,  April
             26, 2004,  and is  retroactive  to November 13, 2003.  This May 10,
             2004 assignment is included in Exhibit B and the lease agreement is
             attached to it and referred to as Exhibit 2.

3.   Cross Pledge Collateral Agreement

     GLSCO,  ELM, the ELM RIRA, the SM RIRA and SM 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,  then GLSCO,  ELM,
     the ELM RIRA,  the SM RIRA and SM 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, the SM RIRA and
     SM. The  purpose  and the intent of the cross  pledge of  collateral  is to
     assure  GLSCO,  ELM, the ELM RIRA,  the SM RIRA,  and SM, 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, the SM RIRA and SM, 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


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Mr. Edward L. Machulak
May 10, 2004
Page 10 of 12 Pages


     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 certain of the collateral  specifically  or  collectively  pledged to
     GLSCO,  ELM, the ELM RIRA,  the SM RIRA and SM consists of 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  obligations  due to ELM and to the loans made by ELM to
     Commerce: Joint Venture, Homespan, Ecomm, SLE, Sanseb and UDI. They jointly
     and  severally  guarantee  payment of the  note(s)  that they  caused to be
     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,  the SM RIRA,  and SM.  Reference is made to
     Exhibit 12 included in the April 9, 1990 confirmation letter.

6.   Re-Execution Agreement(s)

     In the event ELM deems that it is necessary  or  advisable  for him to have
     Commerce  re-execute  any  document(s)  entered  into,  including,  but not
     limited to the promissory note(s) or collateral agreement(s), Commerce will
     re-execute  such  document(s)  reasonably  required by ELM.  Commerce  also
     acknowledges  that  Commerce may be liable to pay certain  costs related to
     any of the  transactions  entered  into  with ELM.  If at a later  date ELM
     determines  that an error has been made in the payment of such costs to him
     then he 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 ELM's written request. The failure of Commerce to comply with Commerce's
     obligation(s) hereunder shall constitute a default and shall entitle ELM to
     the remedies  available for default under any  provisions of the agreements
     including,  but not limited to the promissory note(s) and/or the collateral
     pledge agreement(s) and/or any other Commerce obligation(s).

<PAGE>

Mr. Edward L. Machulak
May 10, 2004
Page 11 of 12 Pages


7.   Omissions

     Commerce  believes that it has included all of its obligations,  monies due
     and has listed  all of the  collateral  due to ELM,  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 under this confirmation agreement.

8.   Real Estate Ownership Adjacent to San Sebastian Gold Mine, Inc.
     (SSGM)

     Commerce  acknowledges that ELM personally owns the real estate adjacent to
     and bordering  the north  boundary line of the SSGM located in the Republic
     of El Salvador,  Central  America,  and that Comseb is  performing  certain
     exploration  and  exploitation  on this  property.  These  costs  are to be
     payable  by an  offset to the  amounts  due to ELM.  (Reference  is made to
     Exhibit B,  "Concesion de Exploracio El Paraiso" - plat map that identifies
     the ELM  (Macay)  "92.13  Hectareas,"  (more or less) in the April 13, 1998
     confirmation letter).

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

Edward A. Machulak
Secretary

<PAGE>

Mr. Edward L. Machulak
May 10, 2004
Page 12 of 12 Pages


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,                By:  Edward L. Machulak,
     Auth. Designee                          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,                By:  Edward L. Machulak,
     President                               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,                By: Edward L. Machulak,
     President                              President


Accepted by:

/s/ Edward L. Machulak
------------------------------------------
Edward L. Machulak,  as an Individual and not as a Director or Officer of any of
the Corporations mentioned in this letter.
Date:  May 10, 2004



<PAGE>

                            EXHIBIT A TO EXHIBIT 99.2
            (Schedule of Principal and Interest as of March 31, 2004
             has been purposely omitted as it only reflects
            the calculations of the principal and interest.)


<PAGE>
                                    EXHIBIT B


                                   Assignment

     For and in  consideration  of the sum of One Dollar  ($1.00) and other good
and  valuable  consideration  such as, but not  limited to, the  continuance  of
extending  the  open-ended,  secured,  on-demand  promissory  note(s)  issued by
Commerce Group Corp.  (Commerce),  a Wisconsin corporation located at 6001 North
91st Street,  Milwaukee,  Wisconsin 53225, in hand paid, the receipt of which is
hereby  acknowledged,  Commerce does hereby sell, assign and transfer to General
Lumber & Supply Co., Inc., a Wisconsin  corporation,  Edward L. Machulak,  as an
individual and not as a Director or Officer of Commerce,  the Edward L. Machulak
Rollover Individual  Retirement Account, the Sylvia Machulak Rollover Individual
Retirement  Account,  and Sylvia  Machulak,  as an individual,  and their heirs,
successors  and  assigns,  all who reside in the County of  Milwaukee,  State of
Wisconsin,  United States of America,  individually and collectively referred to
as "Lenders," all of Commerce's rights, titles, claims, remedies, a nd interests
whatsoever in and to the Renewed San Sebastian Gold Mine Exploitation Concession
consisting  of 1.2306  kilometers  located on the Hacienda San Sebastian and San
Sebastian El Coyolar under the jurisdiction of Santa Rosa de Lima, Department of
La  Union,  Republic  of  El  Salvador,  Central  America,   identified  on  the
cartographic sheet number 2656-IV pursuant to Agreement No. 741 dated August 18,
2003  (delivered  on August 29,  2003)  granted by the El  Salvador  Minister of
Economy of the Republic of El Salvador,  Central  America for a period of twenty
years  commencing  from  the  date of  publication  in the El  Salvador  Federal
Register   (Diario   Oficial)   and  more  fully   described   in  the  attached
Spanish/English document made an integral part of this Assignment (Exhibit 1).

     In addition,  this  Assignment  includes all of Commerce's  rights,  title,
claims,  remedies  and  interests  whatsoever  of a three-year  lease  agreement
entered into on the 26th day of April,  2004,  retroactive to November 13, 2003,
by and between  Corporacion  Salvadorena de  Inversiones  (Corsain) and Commerce
Group Corp.,  more fully  described  in the  attached  copy of the lease made an
integral part of this Assignment (Exhibit 2).

     Said claims,  rights,  title and interest are pledged,  sold,  assigned and
transferred  to the Lenders as collateral  security for loans made and for loans
to be made by the Lenders to Commerce  and also as  collateral  security for any
and all  liabilities,  direct or  indirect,  absolute or  contingent,  due or to
become due, now existing or hereafter arising from Commerce to the Lenders.

     Commerce further acknowledged that Commerce's Directors unanimously adopted
this  Assignment by a resolution  on May 10, 2004,  and that the purpose of this
Assignment is to provide collateral to the above-described Lenders.

     This  Assignment  shall  extend  to the full  term  remaining  on the above
concession  and  license or lease and in any  amendments,  renewals,  changes or
extensions thereof.

     In Witness  Whereof,  Commerce  has caused  this  instrument  to be signed,
sealed and delivered by its proper officers  thereunto duly authorized this 10th
day of May 2004.

ATTEST:

COMMERCE GROUP CORP.                  COMMERCE GROUP CORP.

/s/ Edward L. Machulak                /s/ Edward A. Machulak
-----------------------------         -------------------------------
Edward L. Machulak, President         Edward A. Machulak, Secretary




State of Wisconsin  )
                    )  ss.
County of Milwaukee )

     On this 10th day of May, 2004,  before me,  personally  appeared  Edward L.
Machulak,  President and Edward A. Machulak,  Secretary of Commerce Group Corp.,
to me known to be the  persons  described  in, and who  executed  the  foregoing
instrument,  and acknowledged  that they executed the same as their free act and
deed.


                                      /s/ Sylvia Machulak
                                      -----------------------------------
                                      Sylvia Machulak
                                      Notary Public, Milwaukee County, WI
                                      My commission expires June 11, 2006


<PAGE>


[Note:  Exhibit 1 of Exhibit B is incorporated by reference to Exhibit
10.17 of the Company's S.E.C. Form 10-Q for the quarterly period ended
September 30, 2003 and Exhibit 2 of Exhibit B is incorporated by
reference to Exhibit 10.15 of the Company's S.E.C. Form 10-K for the
fiscal year ended March 31, 2004.]