EXHIBIT 99.3
                                                      COMMERCE GROUP CORP.
                                  6001                         North        91st
                                                               Street,
                                                               Milwaukee,     WI
                                                               53225-1795
                                                               414/462-5310  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 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 14, 2001


Mr. Edward L. Machulak
Edward L. Machulak Rollover
Individual Retirement Account
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 to the Edward L.  Machulak  Rollover  Individual  Retirement
Account (ELM RIRA) 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),  Edward L. Machulak (ELM) as
         an  individual  and not as a Director or Officer of  Commerce,  the 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 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  Misanse 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 SM RIRA  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 SM RIRA 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 SM RIRA.  The  purpose  and the  intent  of the  cross
         pledge of collateral  is to assure GLSCO,  ELM, the ELM RIRA and the SM
         RIRA,  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 SM RIRA,  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 SM RIRA 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 SM RIRA.  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/  Edward A. Machulak
Edward A. Machulak
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/  Edward L. Machulak                              /s/  Edward L. Machulak
------------------------------------        ------------------------------------
By:  Edward L. Machulak, Auth. Designe  By:  Edward L. Machulak, 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, President          By:  Edward L. Machulak, 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, President          By:  Edward L. Machulak, President


Accepted by:

/s/  Edward L. Machulak
------------------------------------
Edward L.  Machulak Rollover Individual
Retirement Account
Date:  May 14, 2001






<PAGE>


                             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.)