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2 LETTER OF GUARANTEE

There are two types of bank guarantees: payment guarantees and performance (contractual) guarantees. Payment guarantee secures payment under a contract (Point 1.5 is an example of a payment guarantee). Performance guarantee secures proper fulfilment of contractual obligations, delivery of goods, return of an advance payment in case of any infringement of the contract, participation in tenders etc.

2.1 CORRESPONDANCE ON LETTER OF GUARANTEE

Putney & Raven Merchants Ltd.

123-5 Lowland Street London EC1 2RH

	Our ref.		Your ref.
			14 May 20__
	Stroganov & Co.
	RF, Moscow,
	Rusakovskaya st., 6
	Dear Sir,

Much to our regret we have to inform you that so far we have not received a bank guarantee from you.

In view of the above we would like to remind you of your letter of 18 April, this year, in which you asked us to change the method of payment by L/C as inconvenient owing to the difficulties and extra expenses connected with its opening.

Meeting you halfway we made you a concession and offered payment for collection terms. You accepted the proposed method of payment and undertook to submit a first-rate bank guarantee for 100% of the contract value within three weeks.

However, as we are still without your bank guarantee we have had to suspend shipment of the goods. Cost of storage will be charged to your account.

We urge you to inform us immediately when the bank guarantee will be submitted and ask you to confirm your consent to cover the expenses for the storage of the goods kept at the port of loading.

Yours faithfully,

D.Raven

D.Raven

Director

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2.2 PAYMENT GUARANTEE GRANTED BY THE BANK

Seeking security of payment in foreign trade Sellers may demand a first-rate bank guarantee

from Buyers. Banks issue payment guarantees charging commissions.

UNION BANK OF

SWITZERLAND

Haldenstrasse 118 3000 Bern 22 Switzerland

Our ref.

Your ref.

25th April 20__

Putney & Raven Merchants Ltd.

123-5 Lowland Street

London EC1 2RH

United Kingdom

Dear Sirs,

You concluded contract No. 78-u for the supply of machinery for the amount of £250,000 with Stroganov & Co. on 15th April. As security for the payment of the goods, an indemnity by a bank shall be furnished.

At the request of Stroganov & Co. we, the Union Bank of Switzerland, hereby irrevocably undertake to pay you on first demand, irrespective of the validity and the effects of the above mentioned contract and waiving all rights of objections and defense arising therefrom, any amount up to £250,000 upon receipt of your duly signed request for payment stating that:

a)you have delivered the goods in conformity with the contract and that

b)you have not received payment at maturity of the sum claimed under this guarantee.

Cont.

- 2 -

The total amount of this indemnity will be reduced by any payment effected hereunder.

For the purpose of identification, your request for payment in writing has to be presented to us through the intermediary of a first-rate bank confirming that the signatures thereon are legally binding upon you.

Your claim is also acceptable if transmitted to us in full by duly encoded telex/cable through a first-rate bank confirming that your original claim has been sent to us by registered mail and that the signatures thereon are legally binding upon you. Your claim will be considered as having been made once we are in possession of your written request for payment or telex or cable to this effect at our above address.

Our indemnity is valid until 25th June 20__ and expires in full and automatically if your claim has not been made on or before that date, regardless of such date

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being a banking day or not.

This indemnity is governed by Swiss law, place of jurisdiction is Zurich.

Yours very truly,

T.Shurgold

T.Shurgold

Union Bank of Switzerland