EXHIBIT 99.1

                           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


Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
6001 North 91st Street
Milwaukee, Wisconsin  53225

Dear Mrs. 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 General  Lumber & Supply Co.,  Inc.  (GLSCO  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

     a.  An open-ended, secured, on-demand promissory note no. 3 which
         was originally issued to GLSCO on December 31, 1981 in the sum
         of $16,836.37 and has been open-ended since that date and is to
         include all future advances, services, charges and interest on a
         monthly basis.  Pursuant to Commerce's Directors' approval on
         October 1, 1990, the interest rate on this note was increased to
         a rate of 4% over the prime rate base established by the First
         National Bank of Chicago, Chicago, Illinois.  Beginning with
         April 1, 1994, the interest rate is 4% over the prime rate base
         established by the First National Bank of Chicago, Chicago,
         Illinois, (now Bank One), but not less than 16% per annum.  The
         interest is payable monthly and the total amount due to GLSCO on
         this promissory note as of March 31, 2004 is $1,262,389.80.
         (Schedule of Principal and Interest as of March 31, 2004,
         Exhibit A)


<PAGE>

Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
May 10, 2004
Page 2 of 10 Pages


         Commerce is no longer issuing monthly  promissory notes for the payment
         of  interest,  purchases,  rent,  etc.,  but  pursuant  to  our  mutual
         understanding,  Commerce is augmenting  all additions and advances made
         by GLSCO,  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 GLSCO.

     b.  Commerce leased approximately 3,100 square feet on a
         month-to-month basis for its corporate headquarter's office; the
         monthly rental charge was $2,145 since October 1, 1992.  As of
         December 1, 1995, Commerce increased the space it rents to 4,032
         square feet, and the monthly rental charge was increased to
         $2,789.  All other terms and conditions of the Amended October
         1, 1992 Lease Agreement remain the same.  (Reference is made to
         Exhibit B, December 1, 1995 Amended Lease Agreement, included in
         April 13, 1998 confirmation letter.) (Reference is made to
         Exhibit B, Lease Agreement, included in April 12, 1993
         confirmation letter.)

     c.  Commerce also acknowledges that it purchases on an open account
         from GLSCO from time to time materials, supplies etc. that it
         needs for itself or for the Joint Venture.  Some of the
         purchases are made through GLSCO because Commerce does not have
         the credit availability from the various sellers of goods,
         merchandise, etc. that is required by it or the Joint Venture.
         The amount due from time to time varies.  As of March 31, 2004,
         nothing is due on this open account.

     d.  GLSCO from time to time has  canceled  part of its debt by the purchase
         of restricted Commerce common shares based on a price determined by the
         Directors  or  at  a  price  sold  to  third  party  purchasers  at  an
         arms-length  transaction.  The  transactions  consummated  during  this
         fiscal year are as follows:

         On June 24, 2003, GLSCO exercised its three-year  option dated June 30,
         2001 to purchase from Commerce 250,000 of Commerce's  restricted common
         shares,  $.10 par value, at a unit price of $.25 per share, for a total
         of  $37,500.00.  The payment for these  shares was made by reducing the
         outstanding promissory note balance due to GLSCO from Commerce.

<PAGE>

Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
May 10, 2004
Page 3 of 10 Pages


         On  December  17,  2003,  GLSCO  purchased  from  Commerce,  463,600 of
         Commerce's restricted common shares, $.10 par value, at a unit price of
         $.25 a share, for a total of $115,900.  The share price was established
         by using the negotiated price  established  with arms-length  unrelated
         third  parties who made  purchases at that time.  The payment for these
         shares was made by reducing the outstanding promissory note balance due
         to GLSCO from Commerce.

         In order to provide continuity and to make an orderly transition of the
         Standing Rock  Campground  (SRC)  operations,  the parties  agreed that
         Commerce  would  operate  the SRC  until  such time  that  GLSCO  would
         terminate this agreement.

         Commerce  retained the profits  earned from the SRC  operations and the
         following describes the amount due to GLSCO:


                         03/31/02       03/31/03      03/31/04
                         --------       --------      --------
         Revenues       $73,364.97     $68,304.07    $58,548.87
         Expenses        40,202.17      41,009.24     37,956.32
                        ----------     ----------    ----------
         Profit         $33,162.80     $27,294.83    $20,592.55

         Therefore,  as of March 31, 2003,  Commerce  acknowledged  that it owed
         GLSCO the sum of  $60,457.63  plus  accumulated  interest in the sum of
         $11,918.31,  for a total  of  $72,375.94.  This  accounts  payable  was
         converted to notes payable due to GLSCO on April 1, 2003.

     e.  On April 1, 2004,  the  accounts  payable  amount due  ($20,592.55)  by
         Commerce to GLSCO was transferred to the notes payable due to GLSCO.

2.   Collateral Pledged

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

     a.  San Luis Estates, Inc. (SLE) Certificate No. 24 which is dated
         December 31, 1981, consisting of 48,645 common shares, $0.50 par
         value, being 50% of the total issued and outstanding shares.
         SLE and Commerce agree that no additional shares of any kind
         whatsoever of SLE will be issued as long as any monies are due
         to GLSCO.  Reference is made to Exhibit 3 included in the April
         9, 1990 confirmation letter.

<PAGE>


Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
May 10, 2004
Page 4 of 10 Pages


     b.  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
         Edward L. Machulak (ELM), as an individual, and not as a
         Director or Officer of Commerce 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 lien on the 331-acre Standing Rock  Campground
         located in Camdenton, Missouri.  The Deed of Trust was filed for
         record on November 5, 1984 in Camden County, Missouri at 1:24
         p.m. in Book 122, Page 200.  See item 1(d) contained herein.
         Reference is made to Exhibit 4 included in the April 9, 1990
         confirmation letter. On August 14, 2000, with Directors'
         approval, SRC, via an agreement, was conveyed to GLSCO in
         consideration of a partial debt cancellation of $1,249,050 debt
         owed to GLSCO and for other consideration contained in said
         agreement.

     c.  Uniform Commercial Code Filing - all other specific assets

         An interest with ELM 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,  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 6, 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

<PAGE>

Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
May 10, 2004
Page 5 of 10 Pages


         UCC-4  continuation  filing  on June  27,  2001 at  8:55  a.m.,  Filing
         #02078155, Exhibit B, included in the May 13, 2002 confirmation letter.

     d.  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 5 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

<PAGE>

Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
May 10, 2004
Page 6 of 10 Pages


             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.

     e.  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

<PAGE>

Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
May 10, 2004
Page 7 of 10 Pages


             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 t
             ax. 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 and 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 Joint  Venture also have  cross-pledged  the
     collateral  without  diminishing  the  rights  of the  specific  collateral
     pledged to each of


<PAGE>

Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
May 10, 2004
Page 8 of 10 Pages


     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.

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 GLSCO and to the loans made by GLSCO
     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 7 included in the April 9, 1990 confirmation letter.

6.   Re-Execution Agreement(s)

     In the event GLSCO deems that it is  necessary  or  advisable  for GLSCO to
     have Commerce re-execute any document(s) entered into,  including,  but not
     limited to the


<PAGE>

Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
May 10, 2004
Page 9 of 10 Pages


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

7.   Omissions

     Commerce  believes that it has included all of its obligations,  monies due
     and has listed all of the  collateral  due to GLSCO,  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>

Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
May 10, 2004
Page 10 of 10 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:

GENERAL LUMBER & SUPPLY CO., INC.

/s/ Sylvia Machulak
---------------------------------
By:  Sylvia Machulak, President
Date:  May 10, 2004

<PAGE>

                        EXHIBIT A TO EXHIBIT 99.1
        (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.]