EXHIBIT 99.2
COMMERCE GROUP CORP.
6001 NORTH 91ST ST.
MILWAUKEE, WI 53225-1795
414-462-5310 . FAX 414-462-5312
E-MAIL info@commercegroupcorp.com
WEBSITE www.commercegroupcorp.com
AND/OR COMMERCE/SANSEB JOINT VENTURE (Joint Venture)
AND/OR HOMESPAN REALTY CO., INC. (Homespan)
AND/OR ECOMM GROUP INC. (Ecomm)
AND/OR SAN LUIS ESTATES, INC. (SLE)
AND/OR SAN SEBASTIAN GOLD MINES, INC. (Sanseb)
AND/OR UNIVERSAL DEVELOPERS, INC. (UDI)
ALL LOCATED AT THE SAME ADDRESS
May 9, 2005
Mr. Edward L. Machulak
903 West Green Tree Road
River Hills, Wisconsin 53217
Dear Mr. Machulak:
At today's Commerce Group Corp. (Commerce) Directors' meeting, the
Directors were informed about the annual confirmation, disclosure and
status letter that you requested from Commerce and its affiliates to
establish and confirm the amount due and the collateral pledged along
with any other Commerce obligations or agreements made to Edward L.
Machulak (ELM and/or Lender) as an individual and not as a Director or
Officer of Commerce or its subsidiaries or as the authorized designee of
the Joint Venture as of Commerce's fiscal year ended March 31, 2005.
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
a. An open-ended, secured, on-demand promissory note (Note) dated
October 1, 1989 in which all of the prior promissory notes were
consolidated into this single Note amounted to $490,217.19 as of
that date. All future advances and interest, not paid, are added
to this Note, and payments to ELM reduce the amount owed. This
Note, together with cash and other advances and interest as of
March 31, 2005, amounts to $7,909,685.66. This Note bears
interest, payable monthly, at the rate of 2% over the prime rate
established from time to time by the First National Bank of
Chicago, Chicago, Illinois, (then Bank One; now the prime rate
published in the Wall Street Journal), but not less than 16% per
annum (Schedule of Principal and Interest for the year ended
March 31, 2005, Exhibit A). 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 ELM, and it will deduct any payments or credits
made by Commerce to the current open-ended, secured, on-demand,
outstanding promissory note(s) issued or obligations owed to ELM.
Mr. Edward L. Machulak
May 9, 2005
Page 2 of 15 Pages
However, on this date, Commerce's Directors have authorized its
Officers to issue renewed annual note(s) (Exhibit B) 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. Therefore, the Directors have unanimously
agreed to the following 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
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
Mr. Edward L. Machulak
May 9, 2005
Page 3 of 15 Pages
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 RESOVED, 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).
b. Salaries, vacation pay
In addition, Commerce owes ELM the following for accrued salaries
and vacation:
Annual
Period Years Salary Total
------ ----- ------ -----
April 1, 1981 - March 31, 1992 11.00 $ 67,740 $ 745,140
April 1, 1992 - Sept. 30, 1996 4.50 $114,750 516,375
Oct. 1, 1996 - March 31, 2005 8.50 $165,000 1,402,500
----- ----------
Balance 24.00 $2,664,015
Vacation Pay Months Payment
------------ ------ -------
April 1981 - March 31, 2005 24 $ 13,750 330,000
----------
Total Due $2,994,015
At Commerce's Annual Board of Directors' Meeting held on October
19, 2001, the Directors adopted a resolution to compensate ELM
for vacation pay based on one month for each year of service
beginning on April 1, 1981, and also the following resolution,
which in part states:
Mr. Edward L. Machulak
May 9, 2005
Page 4 of 15 Pages
"BE IT FURTHER RESOLVED, That the Directors agreed that
on the day the compensation will be paid to Edward L. Machulak,
an adjustment will be made to compensate him for the loss of the
dollar purchasing value caused by inflation and other economic
factors;"
c. ELM Bonus agreement
On February 16, 1987, by a Consent Resolution of all of the
Directors, ELM was awarded as a bonus compensation, the
following: for a period of 20 years, commencing the first day of
the month following the month in which Commerce begins to produce
gold from its El Salvadoran gold mining operations, Commerce will
pay annually to ELM, 2% of the pre-tax profits earned from these
operations. Reference is made to Exhibit 11 included in the
April 9, 1990 confirmation letter.
d. Share loans
To infuse funds into Commerce, Commerce borrowed ELM's free
trading common shares of Commerce and ELM sold these shares as
designee for Commerce's benefit with Commerce receiving all of
the proceeds. For these share loans, Commerce has agreed to pay
ELM interest at the rate of prime plus 3%, payable monthly with
payment by issuing Commerce's restricted common shares and based
on the Commerce shares due to ELM. Interest is also due and
payable monthly with Commerce's restricted common shares for the
shares pledged by ELM as collateral to others, all for the
Company's best interest and benefit. All share loans and
interest are to be paid annually on or before March 31 of each of
Commerce's fiscal years. An accounting of the Commerce common
shares due and/or paid to ELM as of March 31, 2005, pursuant to a
series of Director-approved, open-ended, on-demand loan and
promissory note agreements by and between Commerce and ELM dated
April 1, 1990, May 17, 1989, October 14, 1988 and June 20, 1988,
and for certain continuous loans and/or pledges of ELM's
securities that have taken place and continued to occur during
the fiscal year ended March 31, 2005 is as follows:
1. Share loans None
2. Interest shares due on shares pledged to banks for
an open line of credit None
3. Interest shares due on shares sold for the benefit
of Commerce None
Total Commerce restricted common shares paid and
issued for the fiscal period ended March 31, 2005
to ELM None
Mr. Edward L. Machulak
May 9, 2005
Page 5 of 15 Pages
e. Open ended loan agreements
Reference is made to four Director-approved, open-ended loan
agreements dated June 20, 1988, October 14, 1988, May 17, 1989
(Exhibits B, C and D of the April 12, 1993, confirmation letter)
and April 1, 1990 (Exhibit 2 of the April 9, 1990 confirmation
letter).
f. Misanse share ownership disclosure
On October 23, 1993, in order to comply with the El Salvador
Government's minimum capital requirements, the shareholders of
Mineral San Sebastian S.A. de C.V. (Misanse) voted to increase
Misanse's capitalization from 119,500 colones to 260,000 colones.
This was accomplished via a shareholders' rights offering on the
basis of purchasing one share for each share owned with the
rights expiring on December 10, 1993. According to Misanse's
by-laws, the rights not exercised would be offered
proportionately to the shareholders who did exercise their
rights.
In addition to the rights offering, the Misanse shareholders
authorized the sale of 210 additional common shares to the
following: ten shares to each of the four officers/directors (40
shares), five shares to each of the remaining six directors (30
shares), three shares to each of the ten supplemental directors
(30 shares), (the President and the Secretary of the Company, who
are directors of Misanse, had the right and they purchased ten
and three shares respectively), and 110 shares were sold to the
Company over and above the amount of shares it was entitled to by
the rights offering so that it would retain its 52% ownership
after the issuance of the shares under the rights offering. When
the Company obtained the concession in 1987, it agreed with the
El Salvador Ministry of Economy's office not to increase its 52%
ownership of Misanse. Therefore, after the rights offering, the
Company owned approximately 52%.
On the closing date of December 10, 1993 of this rights offering,
there were 264 shares that were not subscribed and purchased.
The Company would have been entitled to purchase 137 shares (264
x 52%). However, the Company had been prohibited to purchase
these shares as it would have exceeded its 52% ownership of
Misanse shares. The 137 shares were acquired by ELM with prior
approval of Commerce's directors. He acquired an additional four
shares by virtue of his proportionate ownership in the remaining
unsold shares. A Misanse Director-approved drawing was held to
sell the unsubscribed shares. In order to close the sales, 52
shares were purchased by ELM which he agreed in writing to hold
these shares in escrow for a period of one year for the purpose
Mr. Edward L. Machulak
May 9, 2005
Page 6 of 15 Pages
of providing certain named El Salvador Misanse shareholders time
to obtain funds to purchase these shares at his cost. None were
purchased by the Misanse shareholders.
During June 1995, ELM personally purchased an additional 264
Misanse common shares from a Misanse shareholder in an
arms-length transaction. Therefore ELM presently owns a total of
467 Misanse common shares or approximately 17.96% of the total
2,600 Misanse common shares issued and outstanding.
2. Collateral Pledged
The collateral specifically pledged to ELM or as otherwise noted is
as follows:
a. A Collateral Pledge Agreement dated October 14, 1981 granted to
ELM by Commerce pledging the following collateral: 2,002,037
shares of Sanseb common stock, par value $0.10 per share and
1,346 shares of Mineral San Sebastian, S.A. de C.V. common
stock, par value one hundred colones ($11.43) per share. The
shares pledged are as follows: the 618 shares originally owned
by Commerce, and the 618 shares plus 110 shares purchased from
the October 23, 1993 Misanse rights offering. Reference is made
to Exhibit 4 included in the April 9, 1990 confirmation letter.
b. A Collateral Pledge Agreement dated February 24, 1983, by
Commerce, SLE and UDI collectively and individually, pledging
the following collateral:
300 shares of no par value common shares of Homespan (formerly
known as Trade Realty Co., Inc.), Certificate No. 7 dated
January 21, 1974, being 100% of its issued and outstanding
shares. Homespan and Commerce agree that no additional shares
of Homespan will be issued as long as there are any obligations
due to ELM; 1,800 shares of no par value (UDI) capital stock
Certificate No. 17 dated September 15, 1972, representing 100%
of the shares issued and outstanding. UDI and Commerce agree
that no additional shares of UDI will be issued as long as there
are any outstanding obligations due to ELM. Reference is made
to Exhibit 5 included in the April 9, 1990 confirmation letter.
c. Collateral Pledge Agreement dated July 13, 1983 granted to
General Lumber & Supply Co., Inc. (GLSCO) and ELM by Commerce,
SLE, and Ecomm, individually and collectively, pledging the
following collateral:
Mr. Edward L. Machulak
May 9, 2005
Page 7 of 15 Pages
One voting membership certificate of San Luis Valley Irrigation
Well Owners, Inc., Membership Certificate No. 871, dated
November 27, 1979; Certificate No. 312, Membership No. 871,
consisting of .001447 units of Augmentation Plan Number One of
San Luis Valley Irrigation Well Owners, Inc. dated February 8,
1980;
100 common shares of $0.10 par value, Piccadilly (now Ecomm),
Certificate No. 1, dated July 23, 1974. Ecomm and Commerce
agree that no additional shares of Ecomm will be issued as long
as there are any outstanding obligations due to ELM. Reference
is made to Exhibit 6 included in the April 9, 1990 confirmation
letter.
d. A Deed of Trust dated November 3, 1983 by and between Homespan,
as party of the first part, and Ronald K. Carpenter, Esq.
(Trustee), as party of the second part, for the benefit of ELM
and GLSCO, as party of the third part. The Deed of Trust is in
favor of ELM and GLSCO and is open-ended to secure the
promissory note(s) due to ELM and GLSCO and to further secure
any future obligations that Commerce or Homespan may incur from
them. This Deed of Trust is issued to Ronald K. Carpenter,
Esq., Trustee for the benefit of ELM and GLSCO and is a first
lien on the 331-acre Standing Rock Campground located in
Camdenton, Missouri. The Deed of Trust was recorded on November
5, 1984 in Camden County, Missouri at 1:24 p.m. in Book 122,
Page 200. Reference is made to Exhibit 7 included in the April
9, 1990 confirmation letter. On August 14, 2000, with the
Directors' approval, this property, via an agreement, was
conveyed to GLSCO in consideration of the cancellation of
$1,249,050 of debt owed to GLSCO and for other consideration
contained in the said agreement.
e. Commerce/Sanseb Joint Venture (Joint Venture)
Commerce and Sanseb agree that ELM (the other Lenders were
included later) has as collateral, the assignment and pledge of
all of their rights, titles, claims, remedies, and interest
whatsoever in the Joint Venture which was formed on September
22, 1987. In the event of default, whatever interest Commerce
and Sanseb have in the Joint Venture will be transferred to ELM
and it will include whatever assets are owned by the Joint
Venture, including, but not limited to the precious metal ore
reserves. Reference is made to Exhibit C included in the April
8, 1991 confirmation letter.
Mr. Edward L. Machulak
May 9, 2005
Page 8 of 15 Pages
f. Uniform Commercial Code Filing - all other specific assets
ELM's interest with GLSCO in filing financing statements under
the Uniform Commercial Code by an assignment and pledge of all
corporate assets, such as but not limited to the property of
Commerce, Joint Venture, SLE, and Homespan, wherever located,
now owned or hereafter acquired is as follows: all accounts,
all land contract receivables, contract rights, instruments and
chattel paper; all inventory, all jewelry and precious stones,
and all documents relating to inventory, including all goods
held for sale, lease or demonstration, to be furnished under
contracts of service, and raw materials, work in process and
materials and supplies used or consumed in the business of
Commerce, the Joint Venture, SLE, and Homespan; all office
furniture, fixtures and all other equipment; all general
intangibles, all stock and securities of any kind, and all
rights, titles and interest in the Commerce Group Corp./San
Sebastian Gold Mines, Inc. Joint Venture, and all additions and
accessions to, all spare and repair parts, special tools,
equipment and replacements for all returned or repossessed goods
the sale or lease of which gave rise to, and all proceeds and
products of the foregoing. Reference is made to the Wisconsin
Department of Financial Institutions Uniform Commercial Code
filing, Exhibit 10, included in the April 9, 1990 confirmation
letter, the renewed UCC-1 filing on December 23, 1996, Exhibit
B, included in the April 14, 1997 confirmation letter, and the
UCC-4 continuation filing on June 27, 2001 at 8:55 a.m., Filing
#02078155 (Exhibit B of the May 13, 2002 confirmation letter).
g. Acknowledgement of previously recorded collateral provided to
the Lenders
Historical information - San Sebastian Gold Mine Concession
GLSCO, ELM, the Edward L. Machulak Rollover Individual
Retirement Account (ELM RIRA) and the Sylvia Machulak Rollover
Individual Retirement Account (SM RIRA) collectively and
individually identified as the Lender(s), have been assigned on
October 19, 1987, all of the rights, titles, claims, remedies
and interest in the Joint Venture, and to the mine concession
granted by the Government of El Salvador to Mineral San
Sebastian, S.A. de C.V (Misanse) on July 23, 1987, and
thereafter from time to time amended, and which Misanse then
assigned to the Joint Venture on September 22, 1987. This
collateral specifically includes, but is not limited to, all of
the San Sebastian Gold Mine (SSGM) precious metal ore reserves.
Commerce and the Joint Venture have the right to assign this and
any subsequent concession agreement. Reference is made to
Exhibit 9 included in the April 9, 1990 confirmation letter.
Mr. Edward L. Machulak
May 9, 2005
Page 9 of 15 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)
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 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.
Mr. Edward L. Machulak
May 9, 2005
Page 10 of 15 Pages
(4) 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 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. 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.
(5) 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.
Mr. Edward L. Machulak
May 9, 2005
Page 11 of 15 Pages
h. Acknowledgment of collateral provided through May 9, 2005
Commerce's Directors have on May 9, 2005 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 additional collateral for all of the outstanding
loans and obligations as of March 31, 2005, including all future
advances of any kind. Collateral that has been provided through
May 9, 2005 is:
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 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 is
attached to this document (Exhibit C) and the Nueva Esparta
Exploration Concession is attached to Exhibit C and referred to
as Exhibit 1.
3. Cross Pledge Collateral Agreement
GLSCO, ELM, the ELM RIRA, the SM RIRA and SM individually are
entitled to specific collateral that has been pledged to them by
Commerce, its subsidiaries, affiliates and the Joint Venture. Upon
default by Commerce, or its subsidiaries or affiliates or the Joint
Venture, then GLSCO, ELM, the ELM RIRA, the SM RIRA and SM have the
first right to the proceeds from the specific collateral pledged to
each of them. Commerce, its subsidiaries, affiliates, and the Joint
Venture also have cross-pledged the collateral without diminishing
the rights of the specific collateral pledged to each of the
following: GLSCO, ELM, the ELM RIRA, the SM RIRA and SM. The
purpose and the intent of the cross pledge of collateral is to assure
GLSCO, ELM, the
Mr. Edward L. Machulak
May 9, 2005
Page 12 of 15 Pages
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 deduc ting 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 each party should receive from the
excess collateral. Then the amount due to each of them would be
distributed accordingly.
4. Cancellation of Inter-Company Debts Upon Default
Since certain of the collateral specifically or collectively pledged
to GLSCO, ELM, the ELM RIRA, the SM RIRA and SM consists of the
common stock of Homespan, Ecomm, Sanseb, SLE, Misanse, UDI and the
interest in the ownership of the Joint Venture, Commerce agreed, upon
default of the payment of principal or interest to any of the
individual Lender(s) mentioned herein, that it will automatically
cancel any inter-company debts owed to Commerce by any of its
wholly-owned subsidiaries or affiliates or the Joint Venture at such
time as any of the stock or Joint Venture ownership is transferred to
the collateral holders as a result of default of any promissory note.
5. Guarantors
This agreement further confirms that Commerce and all of the
following are guarantors to the obligations due to ELM and to the
loans made by ELM to Commerce: Joint Venture, Homespan, Ecomm, SLE,
Sanseb and UDI. They jointly and severally guarantee payment of the
note(s) that they caused to be issued and also agree that these
note(s) may be accelerated in accordance with the provisions
contained in the agreement and/or any collateral or mortgages
securing these notes. Also, Commerce, all of its subsidiaries and
the Joint Venture agree to the cross pledge of collateral for the
benefit of GLSCO, ELM, the ELM RIRA, the SM RIRA, and SM. Reference
is made to Exhibit 12 included in the April 9, 1990 confirmation
letter.
6. Re-Execution Agreement(s)
In the event ELM deems that it is necessary or advisable for him to
have Commerce re-execute any document(s) entered into, including, but
not limited to the promissory note(s) or collateral agreement(s),
Commerce will re-execute such document(s) reasonably required by ELM.
Commerce also acknowledges that Commerce may be liable to pay certain
costs related to any of the transactions entered into with ELM. If
at a later date ELM determines that an error has been made in the
payment of such
Mr. Edward L. Machulak
May 9, 2005
Page 13 of 15 Pages
costs to him then he may demand payment and Commerce does hereby
agree to make such payment forthwith. All requests for corrections
of any errors and/or payment of costs shall be complied with by
Commerce within seven (7) days of ELM's written request. The failure
of Commerce to comply with Commerce's obligation(s) hereunder shall
constitute a default and shall entitle ELM to the remedies available
for default under any provisions of the agreements including, but not
limited to the promissory no te(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 ELM, however, since
these transactions have taken place over a long period of time in
which changes could have taken place, it is possible that
inadvertently some item(s), particularly collateral, could have been
omitted. If that should prove to be a fact, then Commerce, the Joint
Venture, Homespan, Ecomm, SLE, Sanseb, and UDI agree that those
omissions of collateral, if any, are meant to be included as
collateral under this confirmation agreement.
8. Real Estate Ownership Adjacent to San Sebastian Gold Mine, Inc.
(SSGM)
Commerce acknowledges that ELM personally owns the real estate he
purchased in January of 1988 which is adjacent to and bordering the
north boundary line of the SSGM located in the Republic of El
Salvador, Central America, and that Comseb is performing certain
exploration and exploitation on this property. These costs are to be
payable by an offset to the amounts due to ELM. Commerce also agrees
to sell, assign and transfer at no cost to ELM, the exploration
concession rights included in the New SSGM Exploration
Concession/License rights granted by the GOES under Resolution No. 27
dated February 24, 2003 (delivered March 3, 2003) and the
exploitation rights granted by the GOES under Agreement No. 591 dated
May 20, 2004 (delivered June 4, 2004) pertaining to this parcel of
land. (Reference is made to Exhibit B, "Concesion de Exploracio El
Paraiso" - plat map that identifies the ELM (Macay) "92.13
Hectareas," (more or less) in the April 13, 1998 confirmation
letter).
Mr. Edward L. Machulak
May 9, 2005
Page 14 of 15 Pages
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
Mr. Edward L. Machulak
May 9, 2005
Page 15 of 15 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, Auth. Designee 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, as an Individual and
not as a Director or Officer of any of the
Corporations mentioned in this letter.
Date: May 9, 2005
Exhibit A to Exhibit 99.2
(Schedule of Principal, Interest, Advances
and Withdrawals as of March 31, 2005
has been purposely omitted as it only reflects
the calculations of the principal and interest.)
Exhibit B to Exhibit 99.2
RENEWED PROMISSORY NOTE
Borrower: Commerce Group Corp. Lender: Edward L. Machulak
6001 North 91st Street 903 West Green Tree Rd.
Milwaukee, WI 53225 Milwaukee, WI 53217
Principal Amount: $7,909,685.66
Initial Rate: 2.000% + prime rate, but not less than 16.000%
Date of Renewed Note: March 31, 2005
PROMISE TO PAY. COMMERCE GROUP CORP. ("Borrower") promises to pay to
EDWARD L. MACHULAK ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Seven Million Nine Hundred
Nine Thousand Six Hundred Eighty Five and 66/100 Dollars ($7,909,685.66),
together with interest, paid monthly, on the unpaid principal balance
from March 31, 2005, 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 currently is
5.750% 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.
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.
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 an
yone. 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 L. Machulak
______________________________________________
By: Edward L. Machulak, President
/s/ Edward A. Machulak
_____________________________________________________
By: Edward A. Machulak, Vice President and Secretary
Exhibit C to Exhibit 99.2
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 existing substituted, consolidated
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, executors, administrators,
successors and assigns, all who reside in the County of Milwaukee, State
of Wisconsin, United States of America, individually and collectively
referred to as "Le nders," all of Commerce's rights, titles, claims,
remedies, and interests whatsoever in and to the exploration concession
identified as the Nueva Esparta Exploration Concession/License which was
granted by the Office of the Government of El Salvador Ministry of
Economy's office and the Director of Hydrocarbons and Mines under its
Resolution No. 271 dated May 28, 2004 (delivered June 4, 2004) to
Commerce Group Corp. consisting of an area of 45 square kilometers
identified as Cartographic Sheet Number 2657-111 (scale 1:50000) located
in the municipality of Santa Rosa de Lima, in the Departments of Morazan
and La Union, Republic of El Salvador, Central America, and more fully
described in the attached Spanish and English Resolution No. 271 (Exhibit
1) which is made an integral part of this assignment.
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 9, 2005, and that the
purpose of this Assignment is to provide additional 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 9th day of May 2005.
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 9th day of May, 2005, 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
Exhibit 1 to Exhibit C of Exhibit 99.2
[English translation of attached Spanish document.]
MINISTRY OF ECONOMY
Republic of El Salvador
RESOLUTION No. 271
Ministry of Economy: San Salvador, at 9:05 AM of the day May 25, 2004.
In view of the Recourse of Appeal introduced into the Directorate of
Hydrocarbons and Mines, on December 19, 2003, before the Minister of
Economy, by Sr. Jose Antonio Alfaro Castro, Lawyer, of this domicile,
acting in his capacity of General Power of Attorney for the Company
"COMMERCE GROUP CORP" of this domicile, against Resolution No. 178 issued
at 14:10 on December 1, of the same year by the cited Directorate, that
declares without standing the request for Exploration License that later
on will say, and,
HAVING READ THE ARGUMENTS AND CONSIDERING:
I. That through the referenced Resolution the Directorate of
Hydrocarbons and Mines of this Ministry declared without standing
the Minerals Exploration License especially for gold an silver that
Dr. Jose Antonio Alfaro Castro requested in the name of his
mentioned grantor of Power on October 30, 2002 for the area called
NUEVA ESPARTA for a surface extension of 45 square kilometers
identified in cartographic sheet number 2657-III, scale 1 : 50,000
located in the municipality of Santa Rosa de Lima, in the
Departments of Morazan and La Union respectively.
II. That having admitted the Recourse, the files were transferred to the
Secretary of State with prior notification to the referenced Company
and receiving it, was sent to be heard for the term of the Law, on
completing the hearing through the mentioned Power holder, expressed
that based on Article 45 second line item in the Mining Law, he
requested an opening of proofs, which was done and as well the
applicant presented a document in which he stated that the
Directorate of Hydrocarbons and Mines on issuing the referenced
Resolution founded it on the following arguments: a) little
geological investigation of the exploitation program presented
(SIC); b) lack of sufficient technical capacity to develop the
project on the part of the professionals proposed by the applying
Company; c) That the applying Company did not fulfill the
requirements in the first line item of Article 9 of the Mining Law;
requirements that refer to the technical and financial capacity to
develop mining projects.
III. That in the referred to period of Proof, the applicant presented a
new work plan prepared by known technicians in the material, in
which a program of activities is reflected that complies with the
requirements for this kind of project to be developed in the first
four years by stages, projecting activities like geological mapping,
opening of trenches, geochemistry, laboratory analysis; and the
costs of investment in each stage. Presenting besides, the
documents that contain the names of the companies that will
participate in the Project; as well as the CV's of the companies
that will participate in it, and the CV's of the technicians in the
material that have the required qualifications, and the chart of
investment, costs and expenses of the applying company, copy of the
correspondence in which is sketched the financial capacity, in which
for now the invested money has been for the payment of
administrative expenses and in a lesser scale for investment in
exploration, referring that it will be increased as reflected in the
related project; with that it proves compliance with what is
established in article 9 of the Mining Law. That with what is
explained and with the documental proof that is presented, it
overcomes the deficiencies expressed by the Directorate for
Hydrocarbons and Mines, who asks that the Declaration Without
Standing be reconsidered and grant the Exploration License
requested.
IV. Upon analyzing the resolution that is impugned, it is warned that in
it conclusions were expressed in the sense that: " a) little
geological investigation of the exploitation (sic) program
presented"; b) "lack of technical capacity sufficient to develop the
project on the part of the professionals proposed by the requesting
company", without the argumentation, the criteria or the factual
reasons being laid out in it that allows any analysis to arrive to
said conclusions, therefore the reasoning is completely transparent
in regard to valuing the documents presented with the application.
V. Consequent with what is expressed, in matters of Exploration
Licenses it is necessary to understand: That the text and spirit
with which the Mining Law was issued, just as it was established in
the Considering and in its articles 8 and 9, was that of granting
Exploration Licenses and subsequently a concession for the
exploration of minerals, to those companies that carry out this
activity through the application of modern systems that allow fully
to take advantage of the minerals, having conditioned as a
requirement to acquire mining rights, the ideal; determining as
ideal those who proved to have the technical and financial capacity
to develop mining projects; that on reviewing the documents
presented by the appellant as proof are: the new work plan for the
Nueva Esparta Exploration project; program of exploration for the
mining project, the program to be developed in four years and in
four stages, one per year; letter and summary of Financial
Statements, report of the Public A ccountant of the investment,
costs and expenses made since January 1, 1999 to June 30, 2003,
certified Balance Sheets and Financial Statements by
the Public Auditor, documentation that has value as proof. With
respect to the technical capacity, the names of companies are
presented with letters of commitment that they will work in the
exploitation; and curriculum vitae of the technicians that will
participate in the project. From the latter it is concluded that the
applying company indeed has a geological exploration project for an
area with mining background and counts with technical personnel with
technical capacity to develop the project, for which reason this
Ministry considers that the applying company complies with the
requirements that for that purpose the Law establishes in article 9,
such as having technical and financial capacity to develop the
mining project and resolves the recourse (of appeal) presented has
standing.
Therefore,
In use of my legal faculties and based on what is established in Article
45 of the Mining Law and the considerations expressed;
RESOLVE:
1. The Recourse of Appeal presented December 19, 2003 by Dr. Jose
Antonio Alfaro Castro in his capacity as Power of Attorney for the
Company COMMERCE GROUP CORP has standing; and leaves without effect
Resolution 178 issued by the Directorate of Hydrocarbons and Mines of
this Ministry at 14:00 hours of the day December 1, 2003.
2. Returns the present archives to their place of origin to the end of
granting the License requested.
3. The Directorate of Mines and Hydrocarbons will proceed to carry out
the corresponding monitoring to the end of assuring the fulfillment
of the obligations on the part of the beneficiary under the pain of
applying the sanctions that are legally applicable.
MIGUEL E. LACAYO
MINISTER
[Seal of the Ministry of Economy]
MINISTERIO DE ECONOMIA
Republica de El Salvador, C.A.
RESOLUCION No. 271
MINISTERIO DE ECONOMIA: San Salvador, a las nueve horas con cinco
minutos del dia venticinco de mayo de dos mil cuatro.
Visto el Recurso de Apelacion interpuesto en la Direccion de
Hidrocarburos y Minas, el diecinueve de diciembre de 2003, para ante el
Ministro de Economia, por el Doctor Jose Antonio Alfaro Castro, Abogado
de esta domicilio, actuando como apoderado de la Sociedad COMMERCE GROUP
CORP., en contra de la Resolucion No. 178 emitada a catorce horas con
diez minutos del uno de diciembre del mismo ano de la citada Direccion,
que declara sin lugar solicitud de Licencia de Explotacion que adelante
se dira y,
LEIDOS LOS AUTOS Y CONSIDERANDO:
I. Que mediante la Resolucion recurrida, la Direccion de Hidrocarburos
y Minas de este Ministerio, declaro sin lugar la Licencia de
Exploracion de Minerales especialmente oro y plata que en nombre de
su mencionado poderdante solicito el Doctor Alfaro Castro, el 30 de
octubre del 2002, en el area denominada NUEVA ESPARTA, de una
extension superficial de 45 kilometros cuadrados, identificada en
la hoja cartografica numero 2657-III escala 1:50 ubicada, en los
municipios de Sociedad y Santa Rosa de Lima, en los departamentos
de Morazan y La Union respectivamente.
II. Que admitido el Recurso, fueron trasladadas las diligencias a esta
Secretaria de Estado, previa notificacion a la Sociedad recurrente;
y recibidas las mismas se le mando a oir por el termino de Ley,
quien al evacuar la audiencia por medio del mencionado Apoderado,
expreso que en base al articulo 45 inciso segundo de la Ley de
mineria, solicitaba se abriera a pruebas; por lo que asi se hizo, y
en el mismo, el recurrente presento un escrito en el que manifiesta
que la Direccion de Hidrocarburos y Minas al emitir la Resolucion
recurrida, la fundamento en los argumentos siguientes: a) poca
investigacion geologica del programa de explotacion presentado; b)
falta de capacidad tecnica suficiente para desarrollar el proyecto
de parte de los profesionales propuestos por la sociedad
solicitante; c) Que la Sociedad solicitante no llena los requisitos
senalados en el inciso primero del articulo 9 de la Ley de Mineria;
requisitos que se refiere a la capacidad tecnica y financiera para
desar rollar proyectos mineros.
III. Que en el referido periodo de Prueba, el recurrente presento un
nuevo plan de trabajo elaborado por tecnicos conocedores de la
materia en donde se refleja un programa con actividades que cumplen
los requisitos para esta clase proyectos a desarrollar en los
primeros cuatro anos por etapas, proyectando actividades como mapeo
geologico, apertura de trincheras geoquimicas, analisis de
laboratorio; y los costos de inversion en cada etapa. Presentando
ademas los documentos que contienen los nombres de las empresas que
participaran en el Proyecto, asi como los curriculos de las
empresas que participaran en el mismo, y los curriculos de los
tecnicos en la materia que reunen los requisitos requeridos, y el
cuadro de inversion, costos y gastos de la Sociedad solicitante,
copia de correspondencia en donde se esboza la capacidad
financiera, en la cual por ahora, el dinero invertido ha sido para
el pago de gastos administrativos y en menos escala para inversion
en exploracion refiriendo que se aumentara como se refleja en el
proyecto relacionado: con lo que comprueba darle cumplimiento a lo
que establece el articulo 9 de la Ley de Mineria. Que con lo
expuesto y la prueba documental que presenta superan las
deficiencias expresadas por la Direccion de Hidrocarburos y Minas y
se pide se reconsidera la Declaratoria sin lugar y se otorgue la
Licencia de exploracion solicidata.
IV. Al analizar la resolucion que se impugna, se advierte que en la
misma se expresaron conclusiones en el sentido que: "a) poca
investigacion geologica del programa de explotacion presentado; b)
falta de capacidad tecnica suficiente para desarrollar el proyecto
de parte de los profesionales propuestos por la sociedad
solicitante," sin que se expongan en la misma, la argumentacion,
los criterios o razones facticas que permitan en cualquier
analisis, llegar a dichas conclusiones, de manera que el
razonamiento sea completamente transparente en cuanto a la
valoracion de los documentos presentados con la solicitud.
V. Consecuente con los expuesto en materia de Licencias de Exploracion
ha de entenderse: Que el texto y el espiritu con que se emitio la
Ley de Mineria, tal como se dejo establecido en el considerando I y
articulo 8 y 9 de la misma, fue la de otorgar Licencias de
Exploracion y subsiguiente concesion para la Exploracion de
Minerales, a aquellas empresas que realicen esa actividad mediante
la aplicacion de sistemas modernos que permitan el aprovechamiento
integral de los minerales, habiendo condicionado como requisito
para adquirir derechos mineros, la idonidad; determinado como
idoneas quienes comprobaran tener capacidad tecnica y capacidad
financiera para desarrollar proyectos mineros: que al revisar los
documentos presentados por el apelante como prueba, son nuevo plan
de trabajo de proyecto de exploracion Nueva Esparta, programa de
exploracion del proyecto minero, el programa a desarrollar en los
cuatro anos en cuatro etapas, una por ano: carta y resumen de
Estados Financieros, informe de Contador Publico de la inversion,
costos, y gastos efectuados desde el 01 de enero de 1999 al 30 de
junio de 2003, Balance y Estados Financieros certificados por
Auditor Publico, documentacion que tiene valor probatorio.
Respecto a la capacidad tecnica presenta los nombres de empresas
con cartas compromiso de que trabajaran en la exploitacion
curriculun vitae de los tecnicos que participaran en el proyecto.
De lo antes expuesto se concluye que la empresa solicitante si
tiene un proyecto de exploracion geologica para un area con
antecedentes mineros, y cuenta con personal tecnico con capacidad
para desarrollar el proyecto, por lo que este Ministerio considera
que la Sociedad solicitante cumple con las exigencias que al
efecto establece la Ley en el articulo 9, como es el tener
capacidad tecnica y financiera para desarrollar el proyecto minero
y resuelve ha lugar al recurso interpuesto.
Por tanto,
En uso de mis facultades legales, y con base a lo establecido en el Art.
45 de la Ley de Mineria y las consideraciones expuestas.
RESUELVO:
1. Ha lugar el recurso de Apelacion interpuesto el 19 de diciembre de
dos mil tres, por el Doctor Alfaro Castro en calidad de Apoderado de
la Sociedad COMMERCE GROUP CORP.; y Dejase sin efecto la
resolucion178 emitada por la Direccion de Hidrocarburos y Minas de
este Ministerio, a las catorce hora del dia uno de diciembre de dos
mil tres.
2. Vuelvan las presentes diligencias a su lugar de origen a fin que se
otorgue la licencia solicitada.
3. La Direccion de Minas e Hidrocarburos procecera a realizar el
moniloreo correspondiente, a fin de asegurar el cumplimiento de las
obligaciones por parte del beneficiario so pena de aplicar las
sanciones que legalmente sean procedentes.
Firma por: MIGUEL E. LACAYO, MINISTRO