EXHIBIT 99.3

                              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
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 along with any other Commerce  obligations or agreements made
to the Edward L.  Machulak  Rollover  Individual  Retirement  Account  (ELM RIRA
and/or  Lender) 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

     The total amount of all of the open-ended,  secured,  on-demand  promissory
     notes,  together with interest due to the ELM RIRA,  amounts to $915,065.97
     as of March 31, 2004.  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,  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 the ELM RIRA,  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 the
     ELM RIRA.


<PAGE>

Mr. Edward L.  Machulak
Edward L. Machulak
Rollover Individual Retirement Account
May 10, 2004
Page 2 of 8 Pages


2.   Transactions other than Notes Entered into or Confirmed During this
     Fiscal Year Ended March 31, 2004

     a.  On August 14, 2000, Commerce's 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 $132,447.77 as of March 31, 2004 in exchange for a reduction of debt
         owed by Commerce to the ELM RIRA.

     b.  On December 17, 2003, the ELM RIRA purchased from Commerce
         200,000 of Commerce's restricted common shares, $.10 par value,
         at a unit price of $.25 a share, for a total of $50,000.  The
         share price was established by using the arms length negotiated
         price established with unrelated third parties that made
         purchases during this time.  The payment for these shares was
         made by reducing the outstanding promissory note balance due to
         the ELM RIRA by Commerce.

3.   Collateral Pledged

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

     a.  Acknowledgement of previously recorded collateral provided to
         the Lenders

         Historical information - San Sebastian Gold Mine Concession

         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 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 2 included in the
         April 9, 1990 confirmation letter.

<PAGE>

Mr. Edward L.  Machulak
Edward L. Machulak
Rollover Individual Retirement Account
May 10, 2004
Page 3 of 8 Pages


         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.  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.

<PAGE>

Mr. Edward L.  Machulak
Edward L. Machulak
Rollover Individual Retirement Account
May 10, 2004
Page 4 of 8 Pages

     b.  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  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.

<PAGE>

Mr. Edward L.  Machulak
Edward L. Machulak
Rollover Individual Retirement Account
May 10, 2004
Page 5 of 8 Pages

         (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.

4.   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  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.

5.   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

<PAGE>

Mr. Edward L.  Machulak
Edward L. Machulak
Rollover Individual Retirement Account
May 10, 2004
Page 6 of 8 Pages


     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.

6.   Guarantors

     This agreement  further confirms that Commerce and all of the following are
     guarantors to the  obligations due to the ELM RIRA and 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 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 3 included in the April 9, 1990 confirmation letter.

7.   Re-Execution Agreement(s)

     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(s)  or  collateral
     agreement(s), 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(s)  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(s) and/or the
     collateral pledge agreement(s) and/or any other Commerce obligation(s).

<PAGE>

Mr. Edward L.  Machulak
Edward L. Machulak
Rollover Individual Retirement Account
May 10, 2004
Page 7 of 8 Pages


8.   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 under this confirmation 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

<PAGE>

Mr. Edward L.  Machulak
Edward L. Machulak
Rollover Individual Retirement Account
May 10, 2004
Page 8 of 8 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 Rollover Individual
Retirement Account
Date:  May 10, 2004


<PAGE>

                            EXHIBIT A TO EXHIBIT 99.3
            (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.]