COLLATERAL AGENCY AGREEMENT

Agency Agreement

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GP, Inc | HSBC Bank USA, National Association | SABINE PASS LNG, LP

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Title: COLLATERAL AGENCY AGREEMENT
Governing Law: New York Date: 3/2/2005
Industry: Oil and Gas Operations Sector: Energy

COLLATERAL AGENCY AGREEMENT, Parties: gp inc , hsbc bank usa national association , sabine pass lng lp

Exhibit 10.4

EXECUTION COPY

COLLATERAL AGENCY AGREEMENT

among

HSBC BANK USA, NATIONAL ASSOCIATION,

in its capacity as Collateral Agent and Securities Intermediary

SOCIÉTÉ GÉNÉRALE,

in its capacity as Administrative Agent

SABINE PASS LNG, L.P.,

as Borrower

Dated as of February 25, 2005

TABLE OF CONTENTS


		Page
ARTICLE I DEFINITIONS AND OTHER MATTERS		1
1.01	Definitions	1
1.02	Interpretation	3
1.03	Uniform Commercial Code	4

ARTICLE II THE COLLATERAL AGENT AND THE ESTABLISHMENT OF THE ACCOUNTS		4
2.01	Collateral Agent	4
2.02	The Collateral Accounts	6
2.03	Grant of Lien on Collateral Accounts	8

ARTICLE III PROVISIONS APPLICABLE TO COLLATERAL ACCOUNTS		8
3.01	Permitted Investments	8
3.02	Withdrawal and Transfer Procedure	9
3.03	Transfer of Amounts	12
3.04	Trigger Event	12
3.05	Distribution of Collateral Proceeds	13
3.06	Closing of Collateral Accounts	13
3.07	Disposition of Collateral Accounts upon Termination Date	14

ARTICLE IV THE COLLATERAL ACCOUNTS		14
4.01	Construction Account and Punchlist Retention Subaccount	14
4.02	Revenue Account	17
4.03	Operating Account	20
4.04	Debt Service Accrual Account	20
4.05	Debt Service Reserve Account	21
4.06	Income Tax Reserve Account	21
4.07	Distribution Account	22
4.08	Insurance Proceeds Account	22

ARTICLE V AGREEMENTS WITH AGENTS		27
5.01	Stamp and Other Similar Taxes	27
5.02	Filing Fees, Excise Taxes, Etc.	27

ARTICLE VI THE COLLATERAL AGENT		28
6.01	General	28
6.02	Reliance by the Collateral Agent	28
6.03	Court Orders	29
6.04	Resignation or Removal	29
6.05	Exculpatory Provisions	29
6.06	Fees; Expenses	30
6.07	Reports; Documents	31


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ARTICLE VII MISCELLANEOUS		31
7.01	No Waiver; Remedies Cumulative	31
7.02	Notices	31
7.03	Amendments	31
7.04	Benefit of Agreement; Successors and Assigns	31
7.05	Third-Party Beneficiaries	32
7.06	Counterparts	32
7.07	Effectiveness	32
7.08	Entire Agreement	32
7.09	Severability	32
7.10	Conflict with Other Agreements	32
7.11	Dealings With the Borrower	33
7.12	Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial	33
7.13	Termination	33
7.14	Reinstatement	33
7.15	Attorney-In-Fact	34

ATTACHMENTS


SCHEDULE I	-	Account Names and Numbers
SCHEDULE II	-	Schedule of Fees

EXHIBIT A	-	Form of Withdrawal/Transfer Certificate
EXHIBIT B	-	Form of Distribution Certificate
EXHIBIT C	-	Form of Secured Party Addition Agreement


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AGREEMENT

COLLATERAL AGENCY AGREEMENT (the “ Agreement ”), dated as of February 25, 2005 among SABINE PASS LNG, L.P. , a Delaware limited partnership (the “ Borrower ”), HSBC BANK USA, NATIONAL ASSOCIATION, in its capacity as Collateral Agent (the “ Collateral Agent ”) and Securities Intermediary (the “ Securities Intermediary ”), and SOCIÉTÉ GÉNÉRALE , in its capacity as Administrative Agent (the “ Administrative Agent ”).

RECITALS

A. The Borrower has entered into that certain Credit Agreement, dated as of February 25, 2005 (as amended, modified and supplemented from time to time, the “ Credit Agreement ”), among the Borrower, the financial institutions from time to time parties thereto (collectively, “ Lenders ”), HSBC Bank USA, National Association, as Collateral Agent, and Société Générale, as Administrative Agent, pursuant to which the Lenders have agreed to make certain Loans to the Borrower in the amounts specified and on the terms and subject to the conditions set forth therein.

B. It is a condition precedent to the effectiveness of the Credit Agreement that the parties hereto shall have executed and delivered this Agreement.

AGREEMENT

NOW , THEREFORE , in consideration of the foregoing and other good and valid consideration, the receipt and adequacy of which is hereby expressly acknowledged, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS AND OTHER MATTERS

1.01

Definitions . Unless otherwise defined herein, terms defined in Section 1.01 of the Credit Agreement are used herein (including the introductory paragraph and recitals of this Agreement) as defined therein. In addition, for purposes of this Agreement, the following terms shall have the following meanings:

“ Agents ” means, collectively, the Administrative Agent and the Collateral Agent.

“ Agreement ” has the meaning assigned to such term in the introductory paragraph hereof.

“ Capacity Reservation Fees ” shall have the meaning assigned to such term in the Omnibus Agreements.

“ Collateral Accounts ” means the Collateral Accounts set out in Section 2.02 .


				COLLATERAL AGENCY AGREEMENT

“ Committed Available Amounts ” means (a) cash actually deposited into the Insurance Proceeds Account or the Construction Account, respectively, by any Person or (b) irrevocable commitments to deposit cash into the Insurance Proceeds Account or the Construction Account, respectively, in the form of cash equity contributions to the Borrower by such a Person.

“ Construction Account ” has the meaning assigned to such term in Section 2.02(a)(i) .

“ Construction Payment Subaccount ” has the meaning assiged to such term in Section 2.02(a)(x) .

“ Debt Service Accrual Account ” has the meaning assigned to such term in Section 2.02(a)(v) .

“ Debt Service Reserve Account ” has the meaning assigned to such term in Section 2.02(a)(iv) .

“ Depository Collateral ” has the meaning assigned to such term in Section 2.03 .

“ Distribution Account ” has the meaning assigned to such term in Section 2.02(a)(vii) .

“ Distribution Certificate ” means a certificate substantially in the form of Exhibit B and delivered by the Borrower pursuant to Section 3.02(c)(ii) .

“ Executed Withdrawal/Transfer Certificate ” has the meaning assigned to such term in Section 3.02(b) .

“ Income Tax Reserve Account ” has the meaning assigned to such term in Section 2.02(a)(vi) .

“ Insurance Proceeds Account ” has the meaning assigned to such term in Section 2.02(a)(ix) .

“ Monthly Transfer Date ” means the 26 ^th day of each month or, if such day is not a Business Day, the next succeeding Business Day.

“ Operating Account ” has the meaning assigned to such term in Section 2.02(a)(iii) .

“ Payment Instruction ” means an irrevocable written instruction delivered by the Borrower to the Collateral Agent directing that either: (a) a wire transfer be made or (b) a check be issued by the Collateral Agent, in each case from amounts available in cash and standing to the credit of a Collateral Account, such Payment Instruction to specify the amount of funds to be transferred and the Person or account to which such funds are to be transferred, which information and instructions shall be consistent in all material respects with that set out in the Executed Withdrawal/Transfer Certificate which transferred such amounts into such Account.

“ Permitted Distribution ” has the meaning assigned to such term in Section 4.07(b) .


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“ Punchlist ” has the meaning assigned to such term in the EPC Contract.

“ Punchlist Retention Subaccount ” has the meaning assigned to such term in Section 2.02(a)(ii) .

“ Remedies Direction ” means a written notice and instruction to the Collateral Agent from the Administrative Agent (acting on the direction of the Supermajority Lenders directing the Administrative Agent) to take the actions specified therein with respect to a Trigger Event which has occurred and is continuing.

“ Required Accrual Amount ” means an amount equal to the product of (1) one-sixth (1/6) of the Debt Service in respect of the Secured Obligations payable at the next succeeding Semi-Annual Date or Principal Payment Date (as applicable), multiplied by the number of months since the next preceding Semi-Annual Date or Principal Payment Date, as applicable.

“ Restoration Plan ” has the meaning set forth in Section 4.08(b)(iii) .

“ Restoration Work ” has the meaning set forth in Section 4.08(b)(iii) .

“ Revenue Account ” has the meaning assigned to such term in Section 2.02(a)(viii) .

“ Secured Party Addition Agreement ” means an agreement substantially in the form of Exhibit C .

“ Termination Date ” means the date on which the Secured Parties have received final and indefeasible payment in full of all Secured Obligations and all other amounts owing to the Secured Parties under the Financing Documents.

“ Trigger Event ” means any Event of Default under the Credit Agreement which is designated as a “Trigger Event” by the Administrative Agent in writing to the Borrower and the Collateral Agent.

“ Trigger Event Date ” has the meaning assigned to such term in Section 3.04(a) .

“ Withdrawal Date ” means any Monthly Transfer Date or any other date on which a withdrawal of transfer is to be made from a Collateral Account.

“ Withdrawal/Transfer Certificate ” means a certificate substantially in the form of Exhibit A and delivered by the Borrower pursuant to Section 3.02 .

1.02	Interpretation .

(a)

Principles of Construction . The principles of construction and interpretation set forth in Sections 1.02 and 1.03 of the Credit Agreement shall apply to this Agreement as if set forth herein, mutatis mutandis .


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(b)

Withdrawals to Occur on a Business Day . In the event that any withdrawal, transfer or payment to or from any Collateral Account contemplated under this Agreement shall be required to be made on a day that is not a Business Day, such withdrawal, transfer or payment shall be made on the next succeeding Business Day.

1.03	Uniform Commercial Code . As used herein, the term “UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York. All terms defined in the UCC shall have the respective meanings given to those terms in the UCC, except where the context otherwise requires.

ARTICLE II

THE COLLATERAL AGENT AND THE ESTABLISHMENT OF THE ACCOUNTS

2.01	Collateral Agent .

(a)

Acceptance of Appointment of the Collateral Agent . The Collateral Agent is hereby appointed to act as Collateral Agent and it hereby agrees to act as Collateral Agent under the express terms of this Agreement. Each of the Administrative Agent and the Borrower hereby acknowledges that the Collateral Agent shall act solely as Collateral Agent under the express terms of this Agreement. The Collateral Agent is, and shall act as, the “Securities Intermediary” (within the meaning of Section 8-102(a)(14)(ii) of the UCC) with respect to the Collateral Accounts and pursuant to this Agreement.

(b)

Collateral Accounts Established . The Collateral Agent acknowledges, confirms and agrees that it has established the Collateral Accounts as set out in Section 2.02(a) , which shall be maintained in the name of the Borrower but under the exclusive “control” (within the meaning of Section 8-106(d) of the UCC) of the Collateral Agent at all times until the termination of this Agreement.

(c)

Confirmation and Agreement . The Collateral Agent acknowledges, confirms and agrees that, as of the Closing Date and as of each date on which any Collateral Account is established pursuant to this Agreement:

(i)

each Collateral Account is a “securities account” (within the meaning of Section 8-501 of the UCC) in respect of which the Collateral Agent is a securities intermediary and to the extent of any cash credited to such Collateral Account is a “deposit account” (within the meaning of Section 9-102 of the UCC);

(ii)

the Collateral Agent is the “entitlement holder” (within the meaning of 8-102(a)(7) of the UCC) of all “security entitlements” (within the meaning of 8-102(a)(17) of the UCC) carried in or credited to the Collateral Accounts;


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(iii)

all property delivered to the Collateral Agent pursuant to this Agreement will be promptly credited to a Collateral Account;

(iv)

all “financial assets” (within the meaning of Section 8-102(a)(9) of the UCC) in registered form or payable to or to the order of and credited to any Collateral Account shall be registered in the name of, payable to or to the order of, or specially endorsed to, the Collateral Agent or in blank, or credited to another securities account maintained in the name of the Collateral Agent;

(v)

the Collateral Agent shall promptly comply with all written instructions (including instructions directing the disposition of funds or financial assets) and/or “entitlement orders” (within the meaning of Section 8-102(a)(8) of the UCC) originated by the Administrative Agent with respect to any Collateral Account; and

(vi)

the Collateral Agent shall not change the name or account number of any Collateral Account without the prior written consent of the other Agents and the Borrower.

(d)

Financial Assets Election . The Collateral Agent agrees that each item of property (whether cash, a security, an instrument or obligation, share, participation, interest or other property whatsoever) credited to any Collateral Account shall be treated as a financial asset under Article 8 of the UCC.

(e)

Entitlement Orders; Control . The parties to this Agreement hereby agree that until the Collateral Agent’s obligations under this Agreement shall terminate in accordance with the terms hereof, the Collateral Agent shall have “control” (within the meaning of Section 8-106(d) of the UCC) of the Borrower’s security entitlements with respect to the financial assets credited to the Collateral Accounts.

(f)

Degree of Care; Liens . The Collateral Agent shall exercise the same degree of care in administering the funds held in the Collateral Accounts and the investments purchased from such funds in accordance with the terms of this Agreement as the Collateral Agent exercises in the ordinary course of its day-to-day business in administering other funds and investments for its own account and as required by applicable law. The Collateral Agent shall perform its obligations hereunder in accordance with generally accepted banking industry standards. The Collateral Agent is not party to and shall not execute and deliver, or otherwise become bound by, any agreement under which the Collateral Agent agrees with any Person to comply with entitlement orders or instructions originated by such Person relating to any of the Collateral Accounts or the security entitlements that are the subject of this Agreement. The Collateral Agent shall not grant or suffer to exist any lien, pledge or security interest in any financial asset that is the subject of any security entitlement that is the subject of this Agreement and shall, if any such lien, pledge or security interest shall nevertheless be created, cause the prompt release or discharge of the same.


		- 5 -		COLLATERAL AGENCY AGREEMENT

(g)

Subordination of Lien; Waiver of Set-Off . The financial assets standing to the credit of the Collateral Accounts will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any Person other than the Collateral Agent (except to the extent of returned items and chargebacks either for uncollected checks or other items of payment and transfers previously credited to one or more of the Collateral Accounts, and the Borrower hereby authorizes the Collateral Agent to debit the relevant Collateral Account(s) for such amounts).

(h)

No Other Agreements . Neither the Collateral Agent nor the Borrower have entered or will enter into any agreement with respect to any Collateral Account or any security entitlements or any financial assets carried in or credited to any Collateral Account, other than this Agreement and the other Financing Documents.

(i)

Notice of Adverse Claims . The Collateral Agent hereby represents that, except for the claims and interests of the Borrower in each of the Collateral Accounts, the Collateral Agent, as of the Closing Date, has no knowledge of, and has received no notice of any claim to, or interest in, any Collateral Account or in any security entitlement or financial asset carried therein or credited thereto. If any Person asserts any lien (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against any Collateral Account or in any security entitlement or financial asset carried therein or credited thereto and if the Collateral Agent has notice of such assertion, the Collateral Agent will promptly notify the other Agents and the Borrower thereof.

(j)

Rights and Powers of the Collateral Agent . The rights and powers granted to the Collateral Agent by the Secured Parties have been granted in order to perfect the lien of the Secured Parties in the Collateral Accounts and the security entitlements and financial assets carried therein or credited thereto.

2.02	The Collateral Accounts .

(a)

Establishment of Collateral Accounts . As of the Closing Date, the Collateral Agent has established the following special, segregated and irrevocable collateral accounts at its offices located in New York City bearing the names and account numbers identified in Schedule I (such accounts, collectively, the “ Collateral Accounts ”) (each such Collateral Account being a securities account) each of which shall be maintained at all times by the Collateral Agent until the termination of this Agreement in accordance with Section 7.13 (unless this Agreement otherwise expressly contemplates closure of such Collateral Account prior to the date of the termination of this Agreement):

(i)

the Construction Account (the “ Construction Account ”);


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(ii)

the Punchlist Retention Subaccount (the “ Punchlist Retention Subaccount ”), a sub-account of the Construction Account;

(iii)

the Operating Account (the “ Operating Account ”);

(iv)

the Debt Service Reserve Account (the “ Debt Service Reserve Account ”);

(v)

the Debt Service Accrual Account (the “ Debt Service Accrual Account ”);

(vi)

the Income Tax Reserve Account (the “ Income Tax Reserve Account ”);

(vii)

the Distribution Account (the “ Distribution Account ”);

(viii)

the Revenue Account (the “ Revenue Account ”);

(ix)

the Insurance Proceeds Account (the “ Insurance Proceeds Account ”); and

(x)

the Construction Payment Subaccount (the “ Construction Payment Subaccount ”).

(b)

Account Names and Numbers . The names and account numbers of the Collateral Accounts established hereunder on or prior to the Closing Date are set out on Schedule I . The Collateral Agent shall advise the Agent and the Borrower in writing of the account name and number of any Collateral Account established hereunder by the Collateral Agent and the Borrower, if any, after the Closing Date.

(c)

No Other Accounts . The Borrower shall not open or maintain or cause to be opened or maintained with any bank or other financial institution any deposit, savings or other account other than the Collateral Accounts, the account held by the Borrower at JPMorgan Chase (f/k/a Bank One) with the account name of Sabine Pass LNG, LP and account number 653519421, provided that such account shall be closed by the Borrower and the remaining balance transferred to the Construction Account upon the clearance of all checks issued in respect of such account as of the Closing Date and any other accounts expressly permitted by the Financing Documents or otherwise established with the consent of the Collateral Agent.

(d)

Collateral Accounts Constitute Collateral .

(i)

Each Collateral Account and all amounts from time to time held in such Collateral Account shall be subject to the Lien of the Collateral Agent for the benefit of the Secured Parties.


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(ii)

Each Collateral Account and all amounts from time to time held in such Collateral Account shall be held in the custody of, and maintained by the Collateral Agent for the purposes and on the express terms set out in this Agreement. All such amounts shall constitute a part of the Depository Collateral and shall not constitute payment of any Secured Obligations or any other obligations of the Borrower until expressly applied thereto in accordance with the provisions of this Agreement or the Credit Agreement.

(e)

Standing Instructions . The Borrower and the Administrative Agent hereby irrevocably instruct and authorize the Collateral Agent to deposit funds (promptly upon receipt thereof) into, and transfer and withdraw funds from, the Collateral Accounts in accordance with the terms of this Agreement and the other Financing Documents.

2.03

Grant of Lien on Collateral Accounts . As collateral security for the prompt and complete payment and performance when due of the Secured Obligations, the Borrower has, pursuant to the Security Agreement, assigned, granted and pledged to the Collateral Agent on behalf of and for the benefit of the Secured Parties, a security interest in (a) each Collateral Account and (b) all cash, investments, investment property, securities or other property at any time on deposit in or credited to any Collateral Account, including all income or gain earned thereon and any proceeds thereof (the “ Depository Collateral ”).

ARTICLE III

PROVISIONS APPLICABLE TO COLLATERAL ACCOUNTS

3.01	Permitted Investments .

(a)

Permitted Investments . Pending the application of funds in accordance with Articles III and IV , funds held in any Collateral Account shall be invested and reinvested by the Collateral Agent upon written direction of the Borrower (which may be in the form of a standing instruction) only in Permitted Investments, and with respect to those amounts next anticipated to be transferred or withdrawn, having a scheduled maturity no later than such next anticipated cash withdrawal or transfer from such Collateral Account; provided , however , that: (i) upon the receipt by the Borrower of notice of a Trigger Event delivered by the Administrative Agent pursuant to Section 3.04 and unless otherwise directed therein, or (ii) in the event of any failure by the Borrower to so direct the Collateral Agent in writing on or prior to the day on which any funds are (A) received by the Collateral Agent or (B) transferred between Collateral Accounts in accordance with this Agreement as to the investment of such funds, such investments and reinvestments shall be made by the Collateral Agent in Permitted Investments of the type referred to in clause (f) of the definition of “ Permitted Investments ”. All funds in a Collateral Account that are invested pursuant to this Section 3.01(a) shall be deemed to be held in such Collateral


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Account for purposes of this Agreement and the other Financing Documents and shall constitute part of the Collateral. The Borrower shall bear all risk of loss of capital from investments in Permitted Investments.

(b)

Liability of Collateral Agent .

(i)

Other than with respect to Permitted Investments required to be invested by the Collateral Agent in accordance with the proviso in Section 3.01(a) , the Collateral Agent shall not have any duty to determine whether any investment or reinvestment of monies in any Collateral Account satisfies the criteria set out in the definition of “Permitted Investment”.

(ii)

The Collateral Agent shall not be liable for any loss resulting from any investment in any Permitted Investment or the sale, disposition, redemption or liquidation of such investment or by reason of the fact that the proceeds realized in respect of such sale, disposition, redemption or liquidation were less than that which might otherwise have been obtained.

(c)

Liquidation to Make Disbursements . If and when cash is required for the making of any transfer, disbursement or withdrawal in accordance with Articles III and IV , the Borrower shall cause Permitted Investments to be sold or otherwise liquidated into cash (without regard to maturity) as and to the extent necessary in order to make such transfers, disbursements or withdrawals required pursuant to Articles III and IV by giving written notice of such sale or liquidation to the Collateral Agent. In the event any such investments are redeemed prior to the maturity thereof, the Collateral Agent shall not be liable for any loss or penalties relating thereto.

(d)

Income from Investments . The proceeds from the investment of monies in any Collateral Account in Permitted Investments shall be deposited by the Collateral Agent into the Revenue Account on or before the second Business Day following the month in which such interest, gain or other amount is earned and received; provided that for the avoidance of doubt, such proceeds shall consist of interest, gain and other amounts received in respect of an investment of principal and not the principal itself. Any interest, gain or other amount of income earned on Permitted Investments shall be for the account of the Borrower for income tax purposes.

3.02	Withdrawal and Transfer Procedure .

(a)

Maintenance of Funds in Accounts; Withdrawals . Until withdrawn or transferred pursuant to and in accordance with this Agreement, any amounts deposited into a Collateral Account (other than income from investments transferred to the Revenue Account pursuant to Section 3.01(d) ) shall be held in such Collateral Account. All withdrawals and transfers from any Collateral Account shall be made in accordance with the provisions of Articles III and IV .


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(b)

Withdrawal/Transfer Certificate . Except as otherwise expressly provided herein, the Borrower shall not be entitled to request withdrawals or transfers of monies from any Collateral Account without having provided a Withdrawal/Transfer Certificate authorizing such withdrawal and/or transfer. Withdrawals or transfers from any Collateral Account (except as otherwise expressly provided herein) shall be made by the Collateral Agent following receipt of (and in accordance with) a Withdrawal/Transfer Certificate signed by the Borrower and countersigned by the Administrative Agent (an “ Executed Withdrawal/Transfer Certificate ”). Each Withdrawal/Transfer Certificate shall request withdrawals and transfers to and from Collateral Accounts in the amounts, at the times and in the order of priority set out in Article IV .

(c)

Delivery to Agent and Form of Withdrawal/Transfer Certificate . On the Funding Date and no later than five Business Days prior to each Monthly Transfer Date, at least five Business Days prior to the Final Funding Date, the Borrower shall deliver for purposes of any withdrawal or transfer on the next succeeding Withdrawal Date (unless no withdrawal or transfer is anticipated in respect of such Withdrawal Date):

(i)

to each Agent a Withdrawal/Transfer Certificate signed by an Authorized Officer of the Borrower specifying:

(A)

each Collateral Account from which a withdrawal or transfer is requested and, in the case of any transfer, the relevant Collateral Account(s) to which, and/or other Person(s) to whom, such transfer is to be made;

(B)

the amount requested to be withdrawn or transferred from each such Collateral Account (and the calculation thereof, if required, in accordance with the relevant provisions of Article IV );

(C)

the relevant Withdrawal Date on which such withdrawal or transfer is to be made;

(D)

the purpose for which the amount so withdrawn or transferred is to be applied (if not evident from the nature of the payment or identity of the intended payee); and

(E)

all other information required to be provided in such Withdrawal/Transfer Certificate under, or to evidence compliance with, the relevant provisions of Articles III and IV ; and

(ii)

to each Agent, in the event that the applicable Withdrawal/Transfer Certificate shall request any transfers, payments or withdrawals constituting Restricted Payments, a Distribution Certificate.


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(d)

Agents’ Review of Certificates; Delivery to Collateral Agent .

(i)

In the event that, prior to the relevant Withdrawal Date, the Administrative Agent shall determine that either or both: (A) any amounts specified in a Withdrawal/Transfer Certificate (or an amended Withdrawal/Transfer Certificate, as applicable) have been incorrectly calculated; and/or (B) such Withdrawal/Transfer Certificate (or an amended Withdrawal/Transfer Certificate, as applicable) is inconsistent with, or otherwise fails to satisfy the requirements of, the provisions of this Agreement and the other Financing Documents, the Administrative Agent shall notify the Collateral Agent and the Borrower in writing promptly but in no case later than the third Business Day following the Administrative Agent’s receipt of such Withdrawal/Transfer Certificate and may either (I) return such Withdrawal/Transfer Certificate (or such amended certificate, as applicable) to the Borrower with its determinations noted thereon; or (II) in consultation with the Borrower, make such corrections as it reasonably deems necessary to satisfy the requirements of this Agreement. In the event that the Administrative Agent makes any revisions to a Withdrawal/Transfer Certificate as described above, it shall promptly provide a copy of the same, as so revised, to the Collateral Agent and the Borrower. The Administrative Agent and the Borrower will endeavor to agree and complete the final form Withdrawal/Transfer Certificate (or any amended or corrected certificate), and deliver such certificate to the Collateral Agent, no later than the Business Day prior to the Withdrawal Date to which such certificate relates.

(ii)

The Administrative Agent and the Collateral Agent each shall countersign any accepted Withdrawal/Transfer Certificate (or any amended or corrected Withdrawal/Transfer Certificate, as applicable) (which acceptance or counter-signature shall not be unreasonably withheld or delayed), and the Collateral Agent shall implement such Executed Withdrawal/Transfer Certificate (or such amended or corrected certificate, as applicable) in accordance with Section 3.02(e) and the other provisions of this Agreement.

(iii)

Nothing in this Section 3.02(d) shall preclude any Agent from consulting with the Borrower, any Secured Party or any consultant or expert advisor in making its determinations with respect to the accuracy of any Withdrawal/Transfer Certificate (or any amended or corrected Withdrawal/Transfer Certificate, as applicable).

(e)

Implementation of Withdrawal/Transfer Certificate . Except as otherwise provided in this Agreement, following receipt of an Executed Withdrawal/Transfer Certificate, the Collateral Agent shall pay or transfer the amount(s) specified in such Withdrawal/Transfer Certificate by initiating such payment or transfer not later than 11:30 a.m. (New York time) on the Withdrawal Date set out in such Withdrawal/Transfer Certificate for such payment or transfer


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(or if such certificate is not received by the Collateral Agent at least one Business Day prior to such Withdrawal Date, by 11:30 a.m. (New York time) on the next succeeding Business Day following delivery of such Withdrawal/Transfer Certificate to the Collateral Agent).

(f)

Failure of the Borrower to Submit Withdrawal/Transfer Certificate . Notwithstanding any other provision of this Agreement to the contrary, if at any time the Borrower fails to timely submit or cause to be timely submitted an Executed Withdrawal/Transfer Certificate to the Collateral Agent for the withdrawal, transfer or payment of amounts to any Collateral Account or Person, the Collateral Agent may (but shall not be obligated to) effect any withdrawal, transfer or payment, as the case may be, of any amounts then due and payable or required to be transferred pursuant to the terms of this Agreement or any other Financing Document. The Collateral Agent shall, as soon as practicable, provide written notice to the Borrower regarding any such withdrawals, transfer or payments.

3.03

Transfer of Amounts . Amounts improperly or inadvertently deposited into any Collateral Account shall be transferred by the Collateral Agent into the correct Collateral Accounts. Any withdrawals and transfers hereunder shall only be made to the extent that sufficient funds are then available (including as Permitted Investments) in the Collateral Account from which such withdrawal is to be made.

3.04	Trigger Event .

(a)

The Trigger Event Date . Notwithstanding anything in this Agreement to the contrary, on and after receipt by the Collateral Agent and the Borrower of written notice from the Administrative Agent that a Trigger Event has occurred and is continuing (the date of such notice, the “ Trigger Event Date ”): (i) no transfer or withdrawal of funds from any Collateral Account shall be requested by the Borrower or implemented by the Collateral Agent pursuant to any Withdrawal/Transfer Certificate or otherwise, and (ii) such funds shall be retained in the applicable Collateral Account for application by the Collateral Agent in accordance with a Remedies Direction.

(b)

Accounting . Promptly upon receipt of notice of the occurrence of (but no later than two Business Days after) any Trigger Event Date, the Collateral Agent shall render an accounting to the other Agents and the Borrower of all monies in the Collateral Accounts as of the Trigger Event Date. Such accounting may be satisfied by delivery to the other Agents and the Borrower of the most recently available bank statement for such Collateral Account (including any electronically available statement) and a transaction or activity report for each Collateral Account covering the period from the closing date of the last statement through the delivery date thereof.


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3.05	Distribution of Collateral Proceeds .

(a)

Priority of Payments . Upon the occurrence and during the continuation of a Trigger Event and following delivery of a Remedies Direction to the Collateral Agent in connection with the sale, disposition or other realization, collection or recovery of any amounts in the Collateral Accounts or any other Collateral (or any portion thereof), the Collateral Agent shall apply the proceeds of such sale, disposition, or other realization, collection or recovery toward the payment of the Secured Obligations in the following order of priority:

(i)

first , to any fees, costs, charges and expenses then due and payable to the Administrative Agent, the Collateral Agent and the Securities Intermediary under any Financing Document pro rata based on such respective amounts then due to such Persons;

(ii)

second , to the respective outstanding fees, costs, charges and expenses then due and payable to the Secured Parties under any Financing Document pro rata based on such respective amounts then due to such Persons;

(iii)

third , to any accrued but unpaid Interest Expense owed to the Secured Parties on the Secured Obligations pro rata based on such respective amounts then due to the Secured Parties;

(iv)

fourth , to the respective overdue principal and other Debt Service with respect to the Secured Obligations owed to the Secured Parties under the Credit Agreement, pro rata based on such respective amounts then due to the Secured Parties;

(v)

fifth , to the unpaid principal and other Debt Service with respect to the Secured Obligations then due and payable to the Secured Parties under the Credit Agreement, pro rata based on such respective amounts then due to the Secured Parties; and

(vi)

sixth , after final payment in full of the amounts described in this Section 3.05 and the Termination Date shall have occurred, in accordance with Section 3.07 .

(b)

Borrower Remains Liable for Deficiency . It is understood that the Borrower shall remain liable to the extent of any deficiency between the amount of the proceeds of the Depository Collateral and any other Collateral and the aggregate of the sums referred to in clauses first through fifth of paragraph (a) above.

3.06

Closing of Collateral Accounts . At any point prior to the Termination Date and subject to the other terms and conditions of this Agreement, if the Borrower requests in writing (and the Administrative Agent consents thereto in writing) at any time after the date on which a Collateral Account is no longer intended to be utilized pursuant to this Agreement that such Collateral Account be closed, the Administrative Agent shall direct


		- 13 -		COLLATERAL AGENCY AGREEMENT

the Collateral Agent to close such Collateral Account and transfer any amount standing to the credit of that Collateral Account (together with any accrued interest or profit on or income from such amount) to the Revenue Account for application pursuant to Section 4.02(b) .

3.07

Disposition of Collateral Accounts upon Termination Date . Upon the Termination Date, the Collateral Agent shall pay any sums remaining in the Collateral Accounts to the order of the Borrower or as otherwise required by applicable law upon receipt of a certificate of an authorized officer of the Borrower certifying that the Termination Date has occurred, which certificate shall be acknowledged by the Administrative Agent and the Collateral Agent (which acknowledgement shall not be unreasonably withheld or delayed).

ARTICLE IV

THE COLLATERAL ACCOUNTS

4.01	Construction Account and Punchlist Retention Subaccount .

(a)

Deposits to Construction Account . The following amounts shall be deposited into the Construction Account:

(i)

the Equity Contribution Amount;

(ii)

the proceeds of all Loans made pursuant to the Credit Agreement (other than Loans used to pay Debt Service, which amounts shall be advanced directly to the Secured Parties entitled thereto);

(iii)

Capacity Reservation Fees payable pursuant to the Omnibus Agreements received between the Closing Date and the Final Funding Date;

(iv)

each other contribution by any Person prior to the Term Conversion Date for the purposes of paying Project Costs; and

(v)

deposits from the Revenue Account pursuant to Section 4.02(b)(ii) below.

If any such amounts are remitted to the Borrower, the Borrower shall hold such amounts in trust for the Collateral Agent and shall, as promptly as possible after the receipt thereof, remit such amounts to the Collateral Agent for deposit in the Construction Account, with any necessary endorsements.

(b)

Transfers or Payments from the Construction Account Prior to the Final Funding Date . Prior to the Final Funding Date, on each Monthly Transfer Date, subject to Section 3.05 , the Collateral Agent shall, provided that it has received an Executed Withdrawal/Transfer Certificate in relation thereto, make the following withdrawals and transfers of amounts to the extent then available in the Construction Account as specified in and in accordance with such Executed Withdrawal/Transfer Certificate in the following order of priority:

(i)

First , to the account of the EPC Contractor or such other Person or account specified therein, the amounts specified in the Executed Withdrawal/Transfer Certificate and certified therein to be equal to the Project Costs then due and payable;


		- 14 -		COLLATERAL AGENCY AGREEMENT

(ii)

Second , after making the withdrawal and transfer above, to the Construction Payment Subaccount, the amounts specified in the Executed Withdrawal/Transfer Certificate and certified therein to be equal to the Project Costs due and payable within a 30-day period from the Withdrawal Date;

(iii)

Third , on each Monthly Transfer Date prior to the Term Conversion Date, after making the withdrawals and transfers above, to the Operating Account an amount set forth on the Executed Withdrawal/Transfer Certificate (without duplication of any amounts transferred pursuant to Section 4.02(b)(i)) and certified therein to be equal to the Operation and Maintenance Expenses then due and payable or to become due and payable within the next 30 days, net of any surplus remaining in the Operating Account from prior deposit of funds therein;

(iv)

Fourth , after making the withdrawals and transfers above, to pay to each Secured Party entitled thereto, all Debt Service and all fees, costs, indemnities and expenses then due and payable to such Person pursuant to the Financing Documents; and

(v)

Fifth , after making the withdrawals and transfers above, on the Funding Date, to the Pledgors an amount equal to the portion of Project Costs reasonably expended by or on behalf of the Borrower in excess of the Equity Contribution Amount (including any Estimated Amounts).

(c)

Transfers or Payments from the Construction Account on and after the Final Funding Date . Subject to Section 3.05 , on the Final Funding Date and, in the case of transfers pursuant to clause first , on each Monthly Transfer Date thereafter, the Collateral Agent shall, provided that it has received an Executed Withdrawal/Transfer Certificate in relation thereto, make the following withdrawals and transfers of amounts to the extent then available in the Construction Account as specified in and in accordance with such Executed Withdrawal/Transfer Certificate in the following order of priority:

(i)

First , if applicable, to the account of the EPC Contractor or such other Person or account specified therein the amounts specified in the Executed Withdrawal/Transfer Certificate and certified therein to be equal to the Project Costs then due and payable;

(ii)


		- 15 -		COLLATERAL AGENCY AGREEMENT

(iii)

Third , after making the withdrawals and transfers above, if applicable, to the Punchlist Retention Subaccount an amount specified in the Executed Withdrawal/Transfer Certificate and certified therein to be equal to the total cost of the Punchlist items as notified by the EPC Contractor to the Borrower pursuant to Section 11.6B of the EPC Contract;

(iv)

Fourth , after making the withdrawals and transfers above, to pay to each Secured Party entitled thereto, all fees, costs, indemnities and expenses then due and payable to such Person pursuant to the Financing Documents;

(v)

Fifth , after making each applicable withdrawal and transfer above, to the Debt Service Reserve Account, an amount necessary such that the balance in the Debt Service Reserve Account is equal to the Required Debt Service Reserve Amount; and

(vi)

Sixth , after making each applicable withdrawal and transfer above, any remaining amounts to the Pledgors until the Debt to Equity ratio, after giving effect to the aggregate borrowings pursuant to the Credit Agreement, is no greater than 80:20, and thereafter to the Pledgors and the Secured Parties (for application to the principal amount of the Secured Obligations) in such proportion as to maintain a Debt to Equity ratio of no greater than 80:20.

(d)

Construction Payment Subaccount . Subject to Section 3.05 , all amounts from time to time on deposit in the Construction Payment Subaccount shall be available at all times to the Borrower to be applied solely for the payment when due of Project Costs. Upon the receipt of a Payment Instruction, the Collateral Agent shall transfer funds from the Construction Payment Subaccount on the date (provided that the date specified for payment must be at least one (1) Business Day following receipt by the Collateral Agent), in the amount and to the Person or account specified therein.

(e)

Punchlist Retention Subaccount . Subject to Section 3.05 , funds on deposit in the Punchlist Retention Subaccount may be withdrawn by the Borrower at any time upon delivery to the Collateral Agent of an Executed Withdrawal/Transfer Certificate to be applied in payment of all costs in connection with completion of the Punchlist items to be completed under the EPC Contract after the Final Funding Date.

(f)

Excess Amounts . Upon Final Completion pursuant to the EPC Contract, any amount remaining in the Construction Account, Construction Payment Subaccount or the Punchlist Retention Subaccount shall be transferred by the Collateral Agent upon receipt of an Executed Withdrawal/Transfer Certificate to the Revenue Account for application as set forth in Section 4.02 .


		- 16 -		COLLATERAL AGENCY AGREEMENT

(g)

Capacity Reservation Fees . Notwithstanding the foregoing provisions of this Section 4.01 , all Capacity Reservation Fees received by the Collateral Agent from the Funding Date to the Final Funding Date, shall be transferred to the Distribution Account.

4.02	Revenue Account .

(a)

Deposits to the Revenue Account . The Borrower shall or shall cause the following amounts to be deposited in the Revenue Account:

(i)

all Project Revenues received at any time by or on behalf of the Borrower;

(ii)

the proceeds of all Permitted Indebtedness other than the Loans under the Credit Agreement; and

(iii)

all other amounts received at any time by or on behalf of the Borrower (including, without limitation, all payments in respect of Permitted Swap Agreements and all proceeds of Collateral received by the Collateral Agent pursuant to an exercise of remedies in accordance with the Financing Documents).

Notwithstanding the foregoing, in the event that any such payments, proceeds or other amounts constituting Project Revenues are received by the Borrower, the Borrower shall promptly pay, endorse, transfer and deliver the same to the Collateral Agent for deposit to the Revenue Account, and, until such delivery, the Borrower shall hold such payments and other amounts in trust for the Collateral Agent.

(b)

Transfers and Payments from the Revenue Account Prior to the Term Conversion Date . Prior to the Term Conversion Date, on each Monthly Transfer Date, the Collateral Agent shall, subject to Section 3.05 , provided that it has received an Executed Withdrawal/Transfer Certificate in relation thereto and in each case without duplication of any amount transferred pursuant to Section 4.01(b) , make the following withdrawals and transfers of amounts to the extent then available in the Revenue Account, as specified and in accordance with such Executed Withdrawal/Transfer Certificate in the following order of priority:

(i)

First , to the Operating Account an amount set forth on the Executed Withdrawal/Transfer Certificate and certified therein to be equal to the amount necessary to pay Operation and Maintenance Expenses then due and payable;

(ii)

Second , after making the withdrawal and transfer above, to the Construction Payment Subaccount Account to pay any Project Costs in an amount set forth on the Executed Withdrawal/Transfer Certificate and


		- 17 -		COLLATERAL AGENCY AGREEMENT

certified therein to be equal to Project Costs due or to become due and payable in the next succeeding 30-day period and not otherwise funded from the Construction Account pursuant to Section 4.01(b)(i) ;

(iii)

Third , after making each applicable withdrawal and transfer above, to pay each Secured Party entitled thereto, all Debt Service and all fees, costs, indemnities and expenses then due and payable to such Person pursuant to the Financing Documents and not otherwise funded from the Construction Account pursuant to Section 4.01(b)(iv); and

(iv)

Fourth , after making each applicable withdrawals and transfers above, to the Punchlist Retention Subaccount, an amount, if any, set forth on the Executed Withdrawal/Transfer Certificate and certified therein to be equal to the difference between the proceeds of the final Loan under the Credit Agreement and the cost of Punchlist items notified by the EPC Contractor to the Borrower pursuant to Section 11.6B of the EPC Contract;

provided , that in the case of paragraphs (ii) and (iv) above, the Borrower shall have (a) delivered to the Independent Engineer and the Administrative Agent all invoices in relation thereto, and (b) received written approval of the Administrative Agent (acting in consultation with the Independent Engineer) for such withdrawal and transfer.

(c)

Withdrawals from the Revenue Account following the Term Conversion Date . Subject to Section 3.05 , on each Monthly Transfer Date on or following the Term Conversion Date, the Collateral Agent shall, provided that it has received an Executed Withdrawal/Transfer Certificate in relation thereto, make the following withdrawals and transfers of amounts to the extent then available in the Revenue Account, as specified in and in accordance with such Executed Withdrawal/Transfer Certificate in the following order of priority:

(i)

First , to the Operating Account an amount set forth on the Executed Withdrawal/Transfer Certificate and certified therein to be equal to the Operation and Maintenance Expenses then due and payable or to become due and payable within the next 30 days, net of any surplus remaining in the Operating Account from prior deposits of funds therein;

(ii)

Second , after making the withdrawal and transfer above, to the Borrower in an amount set forth on the Executed Withdrawal/Transfer Certificate and certified therein to be equal to any Emergency Capital Expenditures, provided , that the Borrower may request withdrawals from the Revenue Account for the purposes of making Emergency Capital Expenditures on any date other than a Monthly Transfer Date upon delivery of an Executed Withdrawal/Transfer Certificate and receipt of the written approval of the Agent and the Independent Engineer;


		- 18 -		COLLATERAL AGENCY AGREEMENT

(iii)

Third , after making each applicable withdrawal and transfer above, to each Secured Party entitled thereto, all fees, costs, indemnities and expenses and unscheduled payments (other than prepayments of principal (and interest thereon) of Loans) then due and payable to such Person in accordance with the terms of the Financing Documents;

(iv)

Fourth , after making each applicable withdrawal and transfer above, to the Debt Ser

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