EXHIBIT 99.5
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
March 29, 2010
Mr. Edward A. Machulak Mr. Edward A. Machulak (EAM)
President as an individual
Circular Marketing, Inc. (CMI) 6001 North 91st Street
6001 North 91st Street Milwaukee, Wisconsin 53225
Milwaukee, Wisconsin 53225
Dear Mr. Machulak:
At today's Commerce Group Corp. (Commerce) Directors' meeting, the
Directors were informed about the annual confirmation, disclosure and
status letter from Commerce, its subsidiaries, its affiliates, and the
Joint Venture, and to establish and confirm the amount due and the
collateral pledged along with any other Commerce obligations or
agreements made to the Circular Marketing, Inc. (CMI) and to Edward A.
Machulak (EAM) both referred to as Lenders, as of Commerce's fiscal year
ended March 31, 2010. 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 with Commerce,
which is as follows:
1. Promissory Notes and Other Obligations Due to CMI
a. The total amount of all of the open-ended, secured, on-demand
promissory notes (Notes) together with interest due to CMI is
$468,601.04 as of March 31, 2010. Commerce has renewed this
promissory note as of March 31, 2010 and a copy is attached
(Exhibit A). A schedule including all of the transactions
pertaining to the activities relating to this Note during this
fiscal year ended March 31, 2010 is also attached (Exhibit A-1).
These Note(s) bear interest, payable monthly, at the rate of 4%
over the prime rate published in the Wall Street Journal, but
not less than 16% per annum. Commerce is no longer issuing
monthly Notes for the payment of interest, etc., but pursuant to
our understanding, Commerce is augmenting all additions and
advances made by CMI, and it will deduct any payments or credits
made by Commerce to the current open-ended, secured, on-demand,
outstanding Notes issued or obligations owed to CMI and Commerce
will provide an annual accounting and confirmation letter.
<PAGE>
Mr. Edward A. Machulak
as President of Circular Marketing, Inc.
and as an individual
March 29, 2010
Page 2 of 10 Pages
On May 9, 2005, Commerce's Directors authorized its Officers to
issue renewed annual note(s) (Exhibit B of the May 9, 2005
confirmation letter) so that the Lender will have a current
substituted dated debt instrument. The Directors acknowledged that
the issuance of note(s) for each transaction are too cumbersome and
are not practicable to manage. Also, the length of time involved
and the number of transactions make it impractical to devote the
time and effort to issue a note for each transaction. However,
beginning with the fiscal year which ended March 31, 2007, the
Directors are including the following as Lender(s): John E.
Machulak and Susan R. Robertson, husband and wife (M&R), the
Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular
Marketing, Inc. (CMI) and Edward A. Machulak as an individual
(EAM). Therefore, the Directors have unanimously agreed to continue
to embrace this resolution which was adopted on May 9, 2005:
WHEREAS, in the past 20 years or more the following parties:
General Lumber & Supply Co., Inc. (GLSCO); Edward L. Machulak as an
individual and not as a Director or Officer of Commerce (ELM); the
Edward L. Machulak Rollover Individual Retirement Account (ELM
RIRA), the Sylvia Machulak Rollover Individual Retirement Account
(SM RIRA), and Sylvia Machulak, as a consultant and as an individual
(SM), hereafter collectively and individually identified as the
Lender(s), have accounted for advancing cash funds, earning accrued
interest, and for appropriate credit which was reconciled to the
open-ended, secured, on-demand notes(s); and
WHEREAS, the Directors desire to minimize the record keeping in
these transactions without jeopardizing, diminishing, altering,
changing or losing any rights that the Lenders have by changing the
procedures in handling the recording of any notes(s) issued or to be
issued; and
WHEREAS, in order to provide an easier accounting facility by
renewing the notes(s) on an annual basis to coincide with the
Company's fiscal year (which presently ends on March 31) and to
incorporate said renewed note(s) with the annual confirmation
agreement(s); and
WHEREAS, prior to the change to issue substituted renewed
note(s), the initial promissory note(s) were considered to be
open-ended, secured, on-demand and the additions and deductions were
recognized by separate accounting records; therefore, be it
<PAGE>
Mr. Edward A. Machulak
as President of Circular Marketing, Inc.
and as an individual
March 29, 2010
Page 3 of 10 Pages
RESOLVED, That the Directors authorize and empower the
Officers to substitute and issue renewed consolidated
promissory note(s) at the end of each fiscal year beginning
with the Company's fiscal year ended March 31, 2005 to the
following: General Lumber & Supply Co., Inc. (GLSCO); Edward L.
Machulak as an individual and not as a Director or Officer of
Commerce (ELM); the Edward L. Machulak Rollover Individual
Retirement Account (ELM RIRA), the Sylvia Machulak Rollover
Individual Retirement Account (SM RIRA), and Sylvia Machulak,
as a consultant and as an individual (SM), hereafter
collectively and individually identified as the Lender(s); and
BE IT FURTHER RESOLVED, That the Officers of the Company
are authorized and empowered to assure the Lender(s) that by
substituting and consolidating the existing note(s) and issuing
the renewed note(s) on the last day of the Company's fiscal
year beginning with March 31, 2005 with the understanding that
the intention is that the Lender(s) will not jeopardize, lose,
diminish, risk, alter or change any rights, including the
pledge of collateral, that are inherent with the initial
note(s) by the issuance of annual renewed open-ended, secured,
on-demand promissory note(s); and
BE IT FURTHER RESOLVED, That the Directors acknowledge
that the only purpose of the change and substitution to issue
annual renewed notes(s) is for the convenience, reduced
accounting and reducing the paperwork involved; and
BE IT FURTHER RESOLVED, That the Officers are authorized
and empowered to perform any act that they deem necessary to
accommodate the purpose of issuing annual renewed note(s).
As of March 31, 2010, the following parties are collectively and
individually identified as the Lender(s): General Lumber & Supply
Co., Inc. (GLSCO); Edward L. Machulak as an individual and not as a
Director or Officer of Commerce (ELM); the Edward L. Machulak
Rollover Individual Retirement Account (ELM RIRA), the Sylvia
Machulak Rollover Individual Retirement Account (SM RIRA), Sylvia
Machulak, as a consultant and as an individual (SM), John E.
Machulak and Susan R. Robertson, husband and wife (M&R), the
Machulak, Robertson & Sodos, S.C. Law Firm (Law Firm), Circular
Marketing, Inc. (CMI) and Edward A. Machulak as an individual (EAM).
<PAGE>
Mr. Edward A. Machulak
as President of Circular Marketing, Inc.
and as an individual
March 29, 2010
Page 4 of 10 Pages
b. In addition to the promissory note, Commerce owes CMI the sum of
$14,726.00 for services rendered through March 31, 2010.
2. Other Obligations Due to EAM
As of March 31, 2010, Commerce owes EAM the following for accrued
salaries and vacation:
Period Years Annual Salary Total
------ ----- ------------- -----
March 31, 2008 - March 31, 2010 2.00 $165,000 $330,000
----- --------
Balance 2.00 $330,000
Vacation Pay Months Payment
------------ ------ -------
November 1, 2007 - March 31, 2010 2.42 $ 13,750 $ 33,229
--------
Total Due $363,229
3. Collateral Pledged as of March 31, 2010
The following collateral has been previously assigned to certain
Lenders pursuant to resolutions adopted by the Directors, and from
March 31, 2007 forward includes John E. Machulak and Susan R.
Robertson, husband and wife (M&R), the Machulak, Robertson & Sodos,
S.C. Law Firm (Law Firm), Circular Marketing, Inc. (CMI) and Edward
A. Machulak as an individual (EAM):
(a) 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.
(b) New SSGM Exploration Concession/License (New SSGM) -
approximately 40.7694 square kilometers (10,070 acres)
Government of El Salvador Resolution No. 27.
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
<PAGE>
Mr. Edward A. Machulak
as President of Circular Marketing, Inc.
and as an individual
March 29, 2010
Page 5 of 10 Pages
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. 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.
(c) 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.
(d) 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) Government
of El Salvador Agreement No. 591.
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
<PAGE>
Mr. Edward A. Machulak
as President of Circular Marketing, Inc.
and as an individual
March 29, 2010
Page 6 of 10 Pages
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. On
May 20, 2004 (delivered June 4, 2004) the Government of El
Salvador, under their Agreement Number 591, extended the
exploitation concession for a period of 30 years. A copy of
the assignment dated May 10, 2004, is attached to the May 10,
2004 confirmation letter as Exhibit B and the Renewed SSGM
agreement is attached to Exhibit B and referred to as Exhibit
1.
(e) 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 the May 10, 2004
confirmation letter as Exhibit B and the lease agreement is
attached to Exhibit B and referred to as Exhibit 2.
On March 25, 2008 a nineteen-month lease retroactive to
November 12, 2006 was executed by and between Corsain and
Commerce. The lease was renewed on June 12, 2008 for a
six-month period to expire on December 11, 2008 with an option
to subsequently renew it for additional three-month periods.
The Company chose to exercise this option and renewed the
lease until it was terminated in October of 2009. Reference is
made to Exhibit 10.16 of Commerce's Form 10-K for its fiscal
year ended March 31, 2008 for a copy of this lease.
(f) Nueva Esparta Exploration Concession/License (Nueva Esparta) -
45 square kilometers (11,115 acres) Resolution No. 271
On or about October 20, 2002, the Company filed an application
with the DHM for the Nueva Esparta Exploration
Concession/License which consists of 45 square kilometers and
is located north and adjacent to the New SSGM. On May 25, 2004
the Government of El Salvador, under their Resolution No. 271,
issued the Nueva Esparta Exploration Concession/License for a
period of four years starting from the date following the
notification of this resolution which was received on June 4,
2004. This concession/license may be extended for two two-year
periods or for a total of eight years. This rectangular area
is in the Departments of La Union (east) and Morazan (west) and
in the jurisdiction of the
<PAGE>
Mr. Edward A. Machulak
as President of Circular Marketing, Inc.
and as an individual
March 29, 2010
Page 7 of 10 Pages
City of Santa Rosa de Lima, El Salvador, Central America.
Included in the Nueva Esparta are eight other formerly operated
gold and silver mines known as: the Banadero Mine, the Carrizal
Mine, the Copetillo Mine, the Grande Mine, the La Joya Mine,
the Las Pinas Mine, the Montemayor Mine, and the Or o Mine. A
copy of the assignment dated May 9, 2005 was attached to the
May 9, 2005 confirmation letter as Exhibit C and the Nueva
Esparta Exploration Concession is attached to Exhibit C and
referred to as Exhibit 1.
(g) Acknowledgment of collateral provided through March 31, 2010
Commerce's Directors have on March 29, 2010 authorized and
directed Commerce's Officers to assign all of the rights,
titles, claims, remedies and interest in all of its assets that
it has, including any assets owned by the Joint Venture, to
GLSCO, ELM, the ELM RIRA, the SM RIRA, SM, and from March 31,
2007 to include M&R, the Law Firm, CMI and EAM, collectively
and individually referred to as Lenders, as additional
collateral for all of the outstanding loans and obligations as
of March 31, 2010, including all future advances of any kind.
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, SM, and from March 31, 2007 to include M&R, the
Law Firm, CMI and EAM, 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 each party should receive from the excess collateral. Then
the amount due to each of them would be distributed accordingly.
<PAGE>
Mr. Edward A. Machulak
as President of Circular Marketing, Inc.
and as an individual
March 29, 2010
Page 8 of 10 Pages
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, SM and from March 31, 2007
to include M&R, the Law Firm, CMI and EAM, 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.
6. Guarantors
This agreement further confirms that Commerce and all of the
following are guarantors to the obligations due to CMI and/or EAM
and to the loans made by CMI and/or EAM 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,
SM, and from March 31, 2007 to include M&R, the Law Firm, CMI and
EAM. Reference is made to Exhibit 5 included in the April 9, 1990
confirmation letter.
7. Re-Execution Agreement(s)
In the event CMI and/or EAM deem that it is necessary or advisable
for CMI and/or EAM 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 CMI and/or EAM. Commerce also
acknowledges that Commerce may be liable to pay certain costs
related to any of the transactions entered into with CMI and/or EAM.
If at a later date CMI and/or EAM determine that an error has been
made in the payment of such costs to CMI and/or EAM, then CMI and/or
EAM 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 CMI's and/or EAM's written request. The failure
of Commerce to comply with Commerce's obligation(s) hereunder shall
constitute a default and shall entitle CMI and/or EAM to the
remedies available for
<PAGE>
Mr. Edward A. Machulak
as President of Circular Marketing, Inc.
and as an individual
March 29, 2010
Page 9 of 10 Pages
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).
8. Omissions
Commerce believes that it has included all of its obligations,
monies due and has listed all of the collateral due to CMI and/or
EAM, 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/ Christine M. Wolski
Christine M. Wolski
Secretary
<PAGE>
Mr. Edward A. Machulak
as President of Circular Marketing, Inc.
and as an individual
March 29, 2010
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 A. Machulak /s/ Edward A. Machulak
--------------------------------------- ----------------------------------
By: Edward A. Machulak, Auth. Designee By: Edward A. Machulak, President
ECOMM GROUP INC. SAN LUIS ESTATES, INC.
as Guarantor (Ecomm) as Guarantor (SLE)
/s/ Edward A. Machulak /s/ Edward A. Machulak
--------------------------------------- ----------------------------------
By: Edward A. Machulak, President By: Edward A. Machulak, President
SAN SEBASTIAN GOLD MINES, INC. UNIVERSAL DEVELOPERS, INC.
as Guarantor (Sanseb) as Guarantor (UDI)
/s/ Edward A. Machulak /s/ Edward A. Machulak
--------------------------------------- ----------------------------------
By: Edward A. Machulak, President By: Edward A. Machulak, President
Accepted by: Accepted by:
CIRCULAR MARKETING, INC.
/s/ Edward A. Machulak /s/ Edward A. Machulak
--------------------------------------- ----------------------------------
Edward A. Machulak, President Edward A. Machulak as an individual
Date: March 29, 2010 Date: March 29, 2010
<PAGE>
EXHIBIT A TO EXHIBIT 99.5
RENEWED PROMISSORY NOTE
Borrower: Commerce Group Corp. Lender: Circular Marketing, Inc.
6001 North 91st Street 6001 North 91st Street.
Milwaukee, WI 53225 Milwaukee, WI 53225
Principal Amount: $468,601.04
Initial Rate: 4.000% + prime rate, but not less than 16.000%
Date of Renewed Note: March 31, 2010
PROMISE TO PAY. COMMERCE GROUP CORP. ("Borrower") promises to pay to
CIRCULAR MARKETING, INC. ("Lender"), or order, in lawful money of the
United States of America, the principal amount of Four Hundred Sixty
Eight Thousand Six Hundred One and 04/100 Dollars ($468,601.04),
together with interest, paid monthly, on the unpaid principal balance
from March 31, 2010, until paid in full.
PAYMENT. This is an open-ended, secured, on-demand payment, renewed
promissory note. Interest is to be paid monthly. The Lender, at its
discretion, can add the monthly interest due to the principal balance.
Unless otherwise agreed or required by applicable law, payments will be
applied first to any accrued unpaid interest; and then to principal. The
annual interest rate for this Note is computed on a 365/360 basis; that
is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding and the
interest is payable monthly. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in
writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to
change from time to time based on changes in the prime rate as quoted in
the Wall Street Journal plus two percent, but not less than sixteen
percent per annum. Borrower understands that Lender may make loans to
the Borrower based on other rates as well. The prime rate as of this
date is 3.250% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 2.000 percentage
points over the prime rate, but not less than 16.000% per annum. NOTICE:
Under no circumstances will the interest rate on this Note be less than
16.000% per annum or more than the maximum rate allowed by applicable
law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless
agreed to by Lender in writing, relieve Borrower of Borrower's obligation
to pay on demand, the entire amount due. Rather, any payment will reduce
the principal balance due. Borrower agrees not to send Lender payments
marked "paid in full," "without recourse," or similar language. If
Borrower sends such a payment, Lender may accept it without losing any of
Lender's rights under this Note, and Borrower will remain obligated to
pay any further amount owed to Lender.
INTEREST AFTER DEFAULT. Upon default, including failure to pay on
demand, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 6.000 percentage
points over the prime rate or over the 16.000% rate, whichever is higher.
The interest rate will not exceed the maximum rate permitted by
applicable law.
DEFAULT. Each of the following shall constitute an event of default
("Event of Default") under this Note:
Payment Default. Borrower fails to make any payment when demand is
made under this Note.
Other Defaults. Borrower fails to comply with or to perform any
other term, obligation, covenant or condition contained in this Note
or in any of the related documents or to comply with or to perform
any term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower.
<PAGE>
Default in Favor of Third Parties. Borrower or any Grantor defaults
under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's
property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the related
documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this
Note or the related documents is false or misleading in any material
respect, either now or at the time made or furnished or becomes
false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence
as a going business, the insolvency of Borrower, the appointment of
a receiver for any part of Borrower's property, any assignment for
the benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by
any governmental agency against any collateral securing the loan.
However, this Event of Default shall not apply if there is a good
faith dispute by Borrower as to the validity or reasonableness of
the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or
a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or any Guarantor
disputes the validity of, or liability under, any guaranty of the
indebtedness evidenced by this Note.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
LENDER'S RIGHTS. Upon default or upon demand, the Lender may declare the
entire unpaid principal balance on this Note and all accrued unpaid
interest immediately due, and then Borrower will pay that amount.
COLLATERAL. Borrower acknowledges this Note is secured by all security
agreements, guarantees, mortgages, and other security instruments
previously granted, contemporaneously granted, and granted in the future,
and it has the collateral and other rights all as contained in a certain
confirmation agreement dated May 10, 2004 between all parties contained
therein, and as subsequently amended and updated from time to time.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses, whether or not
there is a lawsuit, including attorneys' fees, expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), and appeals. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by
law.
GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with the laws of the State of Wisconsin. This Note has been
accepted by Lender in the State of Wisconsin.
<PAGE>
OTHER LOAN AGREEMENTS. If Borrower and Lender have either previously or
contemporaneously entered into a Loan or Confirmation Agreements, it is
agreed that this Note is subject to the terms and conditions of such Loan
or Confirmation Agreements. For purpose of this provision, Loan or
Confirmation Agreements shall include, but not be limited to, a Business
Loan Agreement or any other Loan or Confirmation Agreements.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon
Borrower, and upon Borrower's successors and assigns, and shall inure to
the benefit of Lender and Lender's heirs, executors, administrators,
successors and assigns.
GENERAL PROVISIONS. This Note benefits Lender and its successors and
assigns, and binds Borrower and Borrower's successors, assigns, and
representatives. Lender may delay or forgo enforcing any of its rights
or remedies under this Note without losing them. Borrower and any other
person or corporation who signs, guarantees or endorses this Note, to the
extent allowed by law, waive presentment, demand for payment, and notice
of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan or release any
party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice to
anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom
the modification is made. The obligations under this Note are joint and
several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY
NOTE.
BORROWER:
COMMERCE GROUP CORP.
/s/ Edward A. Machulak
----------------------------------
By: Edward A. Machulak, President
/s/ Christine M. Wolski
-----------------------------------------------------
By: Christine M. Wolski, Secretary
<PAGE>
EXHIBIT A-1 TO EXHIBIT 99.5
(Schedule of all transactions pertaining to
the activities relating to Exhibit A to
Exhibit 99.5 for the fiscal year ending March 31, 2010
has been purposely omitted as it only reflects
the calculations of the principal and interest.)
