THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS

	EL PASO ELECTRIC COMPANY   To   STATE STREET BANK AND TRUST COMPANY,   Trustee   GENERAL MORTGAGE INDENTURE AND DEED OF TRUST   Dated as of February 1, 1996

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EL PASO ELECTRIC COMPANY

Reconciliation and Tie between Trust Indenture Act of 1939 and General Mortgage Indenture and Deed of Trust, dated as of February 1, 1996

GENERAL MORTGAGE INDENTURE AND DEED OF TRUST, dated as of February 1, 1996, between EL PASO ELECTRIC COMPANY, a Texas corporation, and STATE STREET BANK AND TRUST COMPANY, a banking corporation organized under the laws of The Commonwealth of Massachusetts, as Trustee.

WHEREAS, all capitalized terms used in this Indenture have the respective meanings set forth in Article 1; and

WHEREAS, it is in the best interests of the Company to provide for the issuance of Bonds from time to time, and to mortgage and pledge the Mortgaged Property to secure payment of such Bonds; and

WHEREAS, all acts and things have been done and performed which are necessary to make this Indenture, when ▇▇▇▇ executed and delivered, a valid and binding mortgage and deed of trust for the security of all Bonds duly issued hereunder and Outstanding from time to time; and the execution and delivery of this Indenture have been in all respects duly authorized.

NOW, THEREFORE, THIS INDENTURE WITNESSETH, that to secure the payment of the Principal of and interest, if any, on all Bonds issued and Outstanding under this Indenture when payable in accordance with the provisions thereof and hereof, and to secure the performance by the Company of, and its compliance with, the covenants and conditions of this Indenture, and in consideration of the premises and of One Dollar paid to the Company by the Trustee, the Company does hereby grant, bargain, sell, warrant, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto State Street Bank and Trust Company, as Trustee, and to its successors in trust and to its assigns, all of the Company’s right, title and interest in and to the Mortgaged Property, including, without limitation, all of the property, rights and interests in property described in Exhibit A, and, subject to Article 12, all of the Mortgaged Property acquired by the Company after the date of the execution of this Indenture, and wherever located, which shall be and are as fully granted and conveyed by this Indenture and as fully embraced within the Lien of this Indenture as if such Mortgaged Property were now owned by the Company and were specifically described herein and conveyed hereby; the Company expressly reserves the right, at any time and from time to time, by one or more Supplemental Indentures, to subject to the Lien and operation of this Indenture any part or all of the Excepted Property upon such terms and conditions and subject to such restrictions, limitations and reservations as may be set forth in such Supplemental Indenture or Indentures.

TO HAVE AND TO HOLD all such properties, rights and interests in property granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed or in which a security interest has been granted by the Company in this Indenture or intended or agreed to be so granted, together with all the appurtenances thereto, unto the Trustee and its successors and assigns forever.

SUBJECT, HOWEVER, to Permissible Encumbrances;

BUT IN TRUST, nevertheless, with power of sale, for the equal and proportionate benefit and security of all present and future Bondholders and holders of any coupons issued and to be issued hereunder and secured by the Lien of this Indenture, and to secure the payment of the Principal of and interest on the Bonds issued and Outstanding under this Indenture when payable in accordance with the provisions thereof and hereof, and to secure the performance by the Company of, and its compliance with, the covenants and conditions of this Indenture without any preference, priority or distinction of any one Bond over any other Bond by reason of priority in the issue or negotiation thereof or otherwise.

PROVIDED, HOWEVER, and these presents are made upon the condition, that if the Company shall pay or cause to be paid the Principal of and interest, if any, on the Bonds at the times and in the manner therein and herein provided, or shall provide, in the manner permitted hereby, for the payment thereof, and if the Company shall also pay or cause to be paid all other sums payable hereunder by it and perform all of the covenants and comply with all of the conditions of this Indenture, then this Indenture and the estate and rights hereby granted shall cease, determine and be void.

IT IS HEREBY COVENANTED AND AGREED, by and between the Company and Trustee, that all Bonds and coupons, if any, are to be authenticated, delivered and issued, and that all Mortgaged Property is to be held, subject to the further covenants, conditions, uses and trusts hereinafter set forth, and the Company, for itself and its successors and assigns, does hereby covenant and agree to and with the Trustee and its successors in trust, for the benefit of those who shall hold Bonds and any coupons, or any of them, as follows:

ARTICLE 1
DEFINITIONS

SECTION 1.01      Trust Indenture Act.

(a)        Whenever this Indenture refers to a provision of the Trust Indenture Act of 1939, as amended (the “TIA”), such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms incorporated in this Indenture have the following meanings as of the date of this Indenture:

“indenture securities” means the Bonds.

“indenture security holder” means a Bondholder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Trustee.

“obligor” on the indenture securities means the Company.

(b)        All terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a rule of the Commission have the meanings assigned to them in the TIA or such statute or rule as in force on the date of execution of this Indenture.

SECTION 1.02      Construction of Accounting Terms.

The accounting terms used in this Indenture shall be construed in accordance with GAAP.

SECTION 1.03      Definitions.

For purposes of this Indenture, the following terms have the following meanings:

“Accountant” means the Chief Accounting Officer, Treasurer, Assistant Treasurer, Controller or Assistant Controller of the Company or a Person who is qualified to pass upon accounting matters, who or which need not be a certified or public accountant and, unless required to be Independent, may be employed by or Affiliated with the Company.

“Accountant’s Certificate” means a certificate signed by an Accountant.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

“Appraiser” means a Person engaged in the business of appraising property or competent to determine the Fair Value or fair value to the Company of the particular property in question, and who or which, unless required to be Independent, may be employed by or Affiliated with the Company.

“Appraiser’s Certificate” means a certificate signed by an Appraiser; any Appraiser’s Certificate which is relied upon by an Independent Engineer, for purposes of an Independent Engineer’s Certificate, shall be signed by an Independent Appraiser.

“Authenticating Agent” means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Bonds of one or more series.

“Authorized Executive Officer” means the Chairman of the Board, the President, any Vice President, the Treasurer or any other officer of the Company designated in an Officers’ Certificate delivered to the Trustee to be an Authorized Executive Officer.

“Authorized Newspaper” means a newspaper or financial journal of general circulation in the specified area, printed in the English language and customarily published on each Business Day; whenever successive publications in an Authorized Newspaper are required by this Indenture, such publications may be made on the same or different days and in the same or in different Authorized Newspapers.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

“Board” means either the board of directors of the Company or the executive committee or any other committee of the board of directors of the Company duly authorized to act for the board of directors of the Company in matters pertaining to this Indenture.

“Board Resolution” means one or more resolutions of the Board or other written action of the Board certified by the Secretary or an Assistant Secretary of the Company as having been duly adopted by the Board and being in full force and effect on the date delivered hereunder.

“Bondable Property” means the Mortgaged Property as of the Initial Issuance Date, plus any property acquired or constructed by the Company which is included in the Mortgaged Property after the Initial Issuance Date, subject to the following:

(a)           Bondable Property:

(i)           need not consist of a specific or completed development, plant, betterment, addition, extension, improvement or enlargement, but may include construction work in progress and property in the process of purchase insofar as the Company shall have acquired legal title to such property, and may include the following:

(A)        fractional and other undivided interests of the Company in property owned jointly or in common with other Persons, whether or not there are with respect to such property other agreements or obligations on the part of the Company, if there is an effective bar against partition of such property which would preclude the sale of such property by any or all of such other Persons or the holder or holders of any Lien or Liens on the interest of any of such other Persons in such property, without the consent of the Company;

(B)       engineering, economic, environmental, financial, geological and legal or other analyses and surveys, data processing equipment and software, preliminary to or associated with the acquisition or construction of property included or intended to be included in the Mortgaged Property;

(C)       paving, grading and other improvements to, under or upon public highways, bridges, parks or other public property of analogous character required for or in connection with the installation or repair of overhead, surface or underground facilities and paid for and used or to be used by the Company, notwithstanding that the Company may not hold legal title thereto;

(D)      property located over, on or under property owned by other Persons, including governmental and municipal agencies, bodies or subdivisions, under permits, licenses, easements, franchises and other similar privileges, if the Company shall have the right to remove the same; and

(ii)           may include renewals, replacements and substitutions of Bondable Property; but

(iii)          shall not include:

(A)      Excepted Property; or

(B)      going concern value or goodwill.

(b)          The “amount” of any Bondable Property means:

(i)           as to any Bondable Property owned by the Company on the Initial Issuance Date, (A) the Gross Book Value thereof as of the Initial Issuance Date, and (B) at any time after the Initial Issuance Date, the lesser of the Gross Book Value as of the Initial Issuance Date or the Fair Value thereof, and

(ii)          as to any Bondable Property other than Bondable Property owned by the Company on the Initial Issuance Date, the lesser of the Cost or Fair Value of such Bondable Property,

in each case as certified to the Trustee in an Engineer’s Certificate, minus, in the case of Bondable Property which is (1) owned by the Company subject to a Prior Lien as of the Initial Issuance Date or (2) acquired by the Company after the Initial Issuance Date but subject to a Prior Lien (other than a Prior Lien to which such Bondable Property becomes subject, solely as a result of such acquisition, pursuant to an after-acquired property clause of such Prior Lien, provided such Prior Lien is not used as the basis of the issuance or incurrence of such Prior Lien Indebtedness), 133-1/3% of the aggregate principal amount of the Prior Lien Indebtedness secured by such Prior Liens and (x) outstanding at the Initial Issuance Date or at the date of such acquisition, or (y) issued or incurred after such respective dates.

(c)            The following adjustments to the amount of Bondable Property shall be made when any Bondable Property is certified to the Trustee in any Engineer’s Certificate delivered with an application, and as a basis, for the authentication and delivery of Bonds, the release of Mortgaged Property or the withdrawal of cash (except in the cases of the release of Mortgaged Property, the withdrawal of cash representing the proceeds of insurance or the payment of or on account of obligations secured by purchase money mortgages, in each case on the basis of Bondable Property acquired or constructed within 90 days prior or subsequent to the date of the application for such release or the receipt by the Trustee of such cash):

(i)            there shall be deducted from the amount (as evidenced in such application) of such Bondable Property (A) which was owned by the Company on the Initial Issuance Date, the amount of such Bondable Property retired after the Initial Issuance Date, and (B) other than Bondable Property owned by the Company on the Initial Issuance Date, the Cost of such Bondable Property retired after the Initial Issuance Date;

(ii)           there shall be added to the Gross Book Value, Cost or Fair Value of such Bondable Property, as the case may be (as evidenced in such application), an amount equal to the aggregate Cost of all Bondable Property acquired or constructed by the Company which is included in the Mortgaged Property after the Initial Issuance Date and Funded as the basis for the withdrawal of cash pursuant to Section 10.01(a)(i)(B); and

(iii)          there may, at the option of the Company, be added to such Gross Book Value, Cost or Fair Value, as the case may be, the sum of:

(A)       all or any portion of (1) the fair value to the Company in cash, as set forth in an Appraiser’s Certificate dated the date of such application, of the unpaid principal amount of any obligations (which are not in default) then held by the Trustee secured by purchase money mortgages and Governmental Obligations then held by the Trustee, plus (2) any cash then held by the Trustee or the trustee or mortgagee under any Prior Lien, in either case representing the proceeds of insurance on, or of the release or other disposition of, Bondable Property retired;

(B)       133-1/3% of the principal amount of any Bonds, the right to the authentication and delivery of which under Article 4 (with respect to the Retirement of Bonds other than Initial Series Bonds) or Article 6 shall have been waived as a basis for the release of Bondable Property retired; and

(C)       100% of the principal amount of any Bonds, the right to the authentication and delivery of which under Article 4 (with respect to the Retirement of Initial Series Bonds) shall have been waived as a basis for the release of Bondable Property retired;

provided, however, that the total of the amounts in clauses (ii) and (iii) shall in no event exceed the amounts deducted under clause (i), and provided, further, that neither any reduction in the Cost or Fair Value of property recorded in an account of the Company nor the transfer of any amount from such an account to another such account shall be deemed to be Bondable Property retired.

All Bondable Property which shall be retired, abandoned, destroyed, released or otherwise disposed of shall be deemed Bondable Property retired, but nothing contained herein shall prevent the Company from causing any released property to become re-encumbered by the Lien of this Indenture as Bondable Property.

“Bondholder” or “Holder” means the bearer of a Coupon Bond or the Registered Holder of a Registered Bond.

“Bonds” means bonds authenticated and delivered under this Indenture.

“Business Day” when used with respect to a Place of Payment or any other particular location specified in Bonds or this Indenture, means any day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in such Place of Payment or other location are generally authorized or required by law, regulation or executive order to remain closed, except as may be otherwise specified in a Supplemental Indenture or Company Order.

“Capital Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP.

“Commission” means the Securities and Exchange Commission.

“Company” means El Paso Electric Company, a Texas corporation, and its successors and assigns.

“Company Order” means a written order, signed in the name of the Company by an Authorized Executive Officer and delivered to the Trustee pursuant to a Supplemental Indenture, for the authentication and delivery of Bonds of the series of Bonds created by such Supplemental Indenture pursuant to any procedures described therein, and (a) specifying in such Company Order certain terms of such Bonds to be authenticated and delivered, or the manner of the determination of such terms, which terms may include, but are not limited to, those set forth in Section 2.01(c), or (b) confirming in such Company Order certain terms of such Bonds to be authenticated and delivered, which terms were given to the Trustee by any agent of the Company which has been designated as agent for such purpose in accordance with such Supplemental Indenture.

“Cost” means, as to any property, the actual cost to the Company of such property including (a) cash or its equivalent paid for such property, including without limitation all costs and allowances for funds used during the construction thereof, and other deferred costs relating to such construction, but only to the extent permitted by GAAP or accounting orders from any governmental regulatory commission, (b) the fair value to the Company in cash (as of the date of delivery) of any securities or other property delivered in connection with the acquisition of such property, (c) the principal amount of any Prior Lien Indebtedness secured by a Prior Lien upon such property at the time of its acquisition unless such principal amount of Prior Lien Indebtedness has previously been used in determining the Cost of other property subject to such Prior Lien, and (d) the principal amount of any other Indebtedness incurred or assumed in connection with the acquisition of such property; the Cost of property acquired by the Company, without consideration or by merger, consolidation or dissolution shall be deemed to be the Fair Value thereof at the date of its acquisition.

The cost of any new plant or system may be deemed to include any franchises, rights and intangible property simultaneously acquired with the same, for which no separate or distinct consideration shall have been paid or apportioned. In cases where different classes or kinds of property have been acquired for a consideration not divided among the respective classes or kinds of property acquired, the Company may allocate on its books in any reasonable manner consistent with sound accounting practice the cost of the property comprising the different classes and kinds of property, and the Company may from time to time classify or reclassify any property so acquired in accordance with the requirements of any regulatory authority having jurisdiction over the accounts of the Company, and the cost as so allocated, classified or reclassified shall be deemed to be the Cost of the respective classes or kinds of property. If the cost of any property is not separately shown by the books of the Company, a good faith estimate may be used.

“Coupon Bond” means any Bond with detachable coupons appertaining thereto evidencing the obligation of the Company to pay interest on such Bond.

“Default” means any event that is or with the passage of time or the giving of notice or both would be an Event of Default.

“Discount Bond” means any Bond which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 11.03.

“Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts in the United States.

“Eligible Obligations” means:

(a)        with respect to Bonds denominated in Dollars, Governmental Obligations; or

(b)        with respect to Bonds denominated in a composite currency or in a currency other than Dollars, such other obligations or instruments as shall be specified with respect to such Bonds in a Supplemental Indenture or Company Order.

“Engineer” means a Person engaged in the engineering business, and who or which, unless required to be Independent, may be employed by or Affiliated with the Company, except, that an Independent Engineer shall sign Engineer’s Certificates delivered in connection with the release of Mortgaged Property pursuant to Section 9.03, 9.04, 9.05, 9.06 or 9.07, if the Fair Value of the Mortgaged Property to be released and of all other Mortgaged Property released since the commencement of the then current calendar year, or the fair value to the Company of any purchase money obligations included in the consideration for such release and of all other securities made a basis of any authentication and delivery of Bonds, withdrawal of cash or release of Mortgaged Property or securities under this Indenture since the commencement of the then current calendar year, as set forth in Engineer’s Certificates required pursuant to Article 9, is 10% or more of the aggregate principal amount of Bonds at the time Outstanding, unless the Fair Value of the Mortgaged Property to be released or the fair value to the Company of any purchase money obligations included in the consideration for such release and of all other securities made a basis of any authentication and delivery of Bonds, as set forth in such Engineer’s Certificate, is, in each case, less than $25,000 or less than 1% of the aggregate principal amount of Bonds at the time Outstanding. An Engineer may, for purposes of providing any Engineer’s Certificate, rely upon the certificates or opinions of any Appraiser or other expert to the extent permitted by the TIA.

“Engineer’s Certificate” means a certificate signed by an Engineer.

“Event of Default” means any event specified in Section 11.01(a).

“Excepted Property” means all of the following property, whether now owned or hereafter acquired by the Company:

(a)        all cash on hand and in banks, shares of stock, bonds, notes, evidences of Indebtedness and other securities not deposited, or required to be deposited, with the Trustee by the express provisions of this Indenture;

(b)        all bills, notes and other instruments, accounts receivable, claims, credits, judgments, demands, general intangibles, licenses and privileges (except franchises and permits), emissions allowances, choses in action, patents, patent applications, patent licenses and other patent rights, trade names, trademarks and all contracts, leases and agreements of whatsoever kind and nature, other than any of the foregoing which are by the express provisions of this Indenture subjected or required to be subjected to the Lien of this Indenture;

(c)        all goods, wares, merchandise, appliances, tools, equipment and spare parts (each prior to being placed in service), materials, supplies and fuel, manufactured, produced, purchased or acquired for the purpose of sale or lease in the ordinary course of business or for use or consumption in, or in the operation of, any properties of, or for the benefit of, the Company, or held in advance of use thereof for maintenance, replacement or fixed capital purposes;

(d)        all electricity, gas, steam, water, ice, oil, coal and other materials, products or services generated, manufactured, produced, provided or purchased by the Company for sale or distribution or used or to be used by the Company;

(e)        all timber, crops, sand, gravel, rocks, earth, natural gas, oil, coal, uranium and other minerals, products or components of land and minerals, harvested, mined or extracted from or otherwise separated from the earth, or lying or being upon, within or under any properties of the Company, including the Mortgaged Property, and timber, crops, sand, gravel, rocks, earth, natural gas, oil, coal, uranium and other land and mineral rights, leases and royalties and income therefrom, and rights to explore for minerals, products and components of land;

(f)         all nuclear fuel, cores and materials, and interest therein;

(g)        all office furniture, office equipment and office supplies, business machines, telephone and communication equipment, computer equipment (except to the extent such equipment constitutes an integral part of the electric generating, transmission and/or distribution operations of the Company), record production, storage and retrieval equipment, and all components, spare parts, accessories, software, programs and supplies used or to be used in connection with the foregoing;

(h)        aircraft, automobiles, railcars, watercraft, trucks, tractors, trailers and other vehicles and moveable equipment, together with all equipment, components, spare parts, accessories, supplies and fuel used or to be used in connection with any of the foregoing;

(i)         all books and records;

(j)         all leasehold interests and leasehold improvements, except as otherwise included as Mortgaged Property by this Indenture or any Supplemental Indenture;

(k)         the last day of the term of each leasehold estate (oral or written, and/or any agreement therefor) now or hereafter enjoyed by the Company, and whether falling within a general or particular description of property herein;

(l)         all real or personal property which (i) is not specifically described in this Indenture, (ii) is not specifically subjected or required to be subjected to the Lien of this Indenture by any express provision of this Indenture, and (iii) is not an integral part of or used or to be used as an integral part of the electric generation, transmission and/or distribution operations of the Company or in connection with the operation of any property specifically subjected or required to be subjected to the Lien of this Indenture by the express provisions of this Indenture; and

(m)         all property excepted from the Lien of this Indenture pursuant to the provisions of Article 12.

The Company may, however, pursuant to the provisions of the Granting Clause contained in the fifth full paragraph of this Indenture, subject to the Lien and operation of this Indenture all or any part of the Excepted Property, in which case such property shall no longer constitute Excepted Property.

“Fair Value” when applied to any property means its fair value to the Company as determined without deduction for any Prior Liens upon such property, which fair value may be determined without physical inspection by use of accounting and engineering records and other data maintained by, or available to, the Company.

“Funded” or “Funding” means the following:

(a)         as such term is applied to Bondable Property, the aggregate amount of Bondable Property which has been used as a basis for the authentication and delivery of Bonds pursuant to Article 3 or the withdrawal of cash pursuant to Section 10.01;

(b)         as such term is applied to Bonds, such Bonds which have been used as a basis for the authentication and delivery of Bonds pursuant to Article 4 or the withdrawal of cash pursuant to Section 10.01, and Bonds paid, purchased or redeemed with money used or applied by the Trustee pursuant to Section 10.01;

(c)         as such term is applied to Prior Lien Indebtedness, such Prior Lien Indebtedness which has been (i) used as a basis for the authentication and delivery of Bonds pursuant to Article 6 or the withdrawal of cash pursuant to Section 10.01, (ii) used as a basis for the issuance of Prior Lien Indebtedness under such Prior Lien, or (iii) used as the basis for the release of property or the withdrawal of cash under any Prior Lien; and Prior Lien Indebtedness paid with money used or applied by the Trustee pursuant to Section 10.01;

(d)         as such term is applied to Bonds and/or Prior Lien Indebtedness, such Bonds and/or Prior Lien Indebtedness which have been used as a basis for a waiver by the Company, pursuant to Section 9.05 or 9.06, of its right to the authentication and delivery of Bonds pursuant to Article 4 or Article 6; and

(e)        as such term is applied to Bonds, Prior Lien Indebtedness and/or Bondable Property, such Bonds, Prior Lien Indebtedness and/or Bondable Property which have been allocated or used as a basis for any credit or action or pursuant to any provision of, or retired through the operation of, any sinking, improvement, maintenance, replacement or analogous fund for any series of Bonds; provided, however, that any such Bonds, Prior Lien Indebtedness or Bondable Property so allocated or used shall be reinstated as Unfunded when all of the Bonds of the series of Bonds in connection with which such fund was established are Retired.

“GAAP” means generally accepted accounting principles in use at the Initial Issuance Date, or, at the option of the Company, other generally accepted accounting principles which are in use at the time of their determination; in determining generally accepted accounting principles, the Company may, but shall not be required to, conform to any accounting order, rule or regulation of any regulatory authority having jurisdiction over the electric generating, transmission and distribution operations of the Company.

“Governmental Obligations” means direct obligations of, or obligations unconditionally guaranteed by, the United States of America.

“Gross Book Value” means the value of the Bondable Property as reflected in the entries “Net Plant in Service” and “Construction Work in Progress” on the balance sheet of the Company as of the Initial Issuance Date.

“Guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates.

“Indebtedness” means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker’s acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person.

“Indenture” means this General Mortgage Indenture and Deed of Trust and all Supplemental Indentures; all references to “herein”, “hereof” and “hereunder” shall respectively mean in, of or under this Indenture.

“Independent” when used with respect to any specified Person means that such Person (a) is in fact independent, (b) does not have any direct financial interest or any material indirect financial interest in the Company or in any other obligor on the Bonds or in any Affiliate of the Company or any such other obligor, (c) is not connected with the Company or such other obligor as an Affiliate or an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions, and (d) is selected by an Authorized Officer and approved by the Trustee in the exercise of reasonable care. Any certificate of a Person who is Independent shall contain a statement that the signer thereof is Independent under this Indenture.

“Initial Issuance Date” means the date of the issuance of the Initial Series Bonds as set forth in the Company Order executed and delivered to the Trustee in connection therewith.

“Initial Series Bonds” means the “Investor Series Bonds” and the “Collateral Series Bonds”, as defined in and issued by the Company pursuant to the First Supplemental Indenture to this Indenture, dated as of February 1, 1996, between the Company and the Trustee, in the amounts issued in accordance therewith on the Initial Issuance Date.

“Investment Securities” means, except as otherwise provided in a Supplemental Indenture which creates and establishes a particular series of Bonds, any of the following obligations or securities on which neither the Company nor an Affiliate thereof is the obligor: (a) Governmental Obligations; (b) interest bearing deposit accounts (which may be represented by certificates of deposit) in national or state banks (which may include the Trustee or any Paying Agent) or savings and loan associations having total assets of not less than $250,000,000; (c) bankers’ acceptances drawn on and accepted by commercial banks (which may include the Trustee or any Paying Agent) having a combined capital and surplus of not less than $100,000,000; (d) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, any State or Territory of the United States of America or the District of Columbia, or any political subdivision of any of the foregoing, which are rated in any of the three highest rating categories (without regard to modifiers) by a nationally recognized statistical rating organization; (e) bonds or other obligations of any agency or instrumentality of the United States of America; (f) commercial or finance company paper which is rated in any of the two highest rating categories (without regard to modifiers) by a nationally recognized statistical rating organization; (g) corporate debt securities rated in any of the three highest rating categories (without regard to modifiers) by a nationally recognized statistical rating organization; (h) repurchase agreements with banking or financial institutions having a combined capital and surplus of not less than $100,000,000 (which may include the Trustee or any Paying Agent) with respect to any of the foregoing obligations or securities; and (i) securities issued by any regulated investment company (including any investment company for which the Trustee or any Paying Agent is the advisor), as defined in Section 851 of the Internal Revenue Code of 1986, as amended, or any successor section of such Code or successor federal statute; provided, however, that the portfolio of such investment company is limited to obligations that are bonds, notes, certificates of indebtedness, treasury bills or other securities now or hereafter issued, which are guaranteed as to principal and interest by the full faith and credit of the United States of America, which portfolio may include repurchase agreements which are fully collateralized by any of the foregoing obligations.

“Lien” means, with respect to any asset, any mortgage, pledge, lien, encumbrance, charge or adverse claim affecting title or resulting in a charge against real or personal property, or a security interest of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).

“Lien of this Indenture” means the Lien created by this instrument (including the Lien on property acquired after the date of the execution of this Indenture) and the Lien created by any subsequent conveyance, delivery or pledge to the Trustee, whether made by the Company or any other Person, effectively constituting any property a part of the security held by the Trustee for the benefit of the Holders of all Outstanding Bonds.

“Mortgaged Property” means, as of any particular time, (i) all of the real, personal and mixed property which is an, integral part of or is used or to be used as an integral part of the electric generating, transmission and/or distribution operations of the Company, (ii) any undivided legal interest of the Company in any such property which is jointly owned by the Company and any other Person or Persons, (iii) franchises and permits owned by the Company in connection with the electric generating, transmission and/or distribution operations of the Company, and (iv) any other property which at said time is subject, or is intended by the terms of this Indenture to be subject, to the Lien of this Indenture (including any securities, purchase money mortgages, insurance and sale proceeds and other cash held by the Trustee or required by this Indenture to be paid to the Trustee), however created, including, without limitation (a) all of such property which is acquired by the Company after the Initial Issuance Date, and (b) all of the property which is described in Exhibit A and in Supplemental Indentures; provided, however, that Mortgaged Property shall not be deemed to include Excepted Property.

“Officers’ Certificate” means a certificate signed by the Chairman of the Board, the President or any Vice President of the Company and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company. Each such Officers’ Certificate shall comply with the requirements of Section 20.01.

“Opinion of Counsel” means a written opinion of counsel, who may be Independent counsel or counsel who is an employee of or counsel to the Company. Each such Opinion of Counsel shall comply with the requirements of Section 20.01.

“Outstanding” means, as of any time with respect to Bonds, all Bonds which theretofore have been authenticated and delivered by the Trustee under this Indenture, except (a) Bonds theretofore paid, retired, redeemed, repurchased, discharged or canceled, or Bonds for the purchase, payment or redemption of which money or Eligible Obligations in the necessary amount shall have been deposited with, or shall then be held by, the Trustee with irrevocable direction to apply such money or the proceeds of such Eligible Obligations to the extent provided in Section 17.01 to such purchase, payment or redemption; provided, however, that, in the case of redemption or repurchase, the notice required by this Indenture and any Supplemental Indenture executed with respect to the Bonds to be redeemed or repurchased shall have been given or provided for to the satisfaction of the Trustee, (b) Bonds deposited with or held in pledge by the Trustee under this Indenture, including any Bonds so held under any sinking, improvement, maintenance, replacement or analogous fund, and (c) Bonds paid or in exchange or substitution for and/or in lieu of which other Bonds have been authenticated and delivered, unless such Bonds are held by Persons in whose hands such Bonds are valid obligations of the Company; provided, however, that for purposes of determining whether or not the Holders of the requisite principal amount of the Bonds Outstanding under this Indenture, or the Outstanding Bonds of any series, have given any request, demand, authorization, direction, notice, consent, vote or waiver or taken any other action hereunder, or whether or not a quorum is present at a meeting of Holders of Bonds,

(i)         Bonds owned by the Company or any other obligor upon the Bonds or any Affiliate of the Company or of such other obligor (unless the Company, such Affiliate or such obligor owns all Bonds Outstanding under this Indenture, or all Outstanding Bonds of each such series, as the case may be, determined without regard to this clause (i)) shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to the presence of a quorum, only Bonds which the Trustee knows to be so owned shall be so disregarded; provided, however, that Bonds so owned which have been pledged in good faith may be regarded as Outstanding if it is established to the reasonable satisfaction of the Trustee that the pledgee, and not the Company or any such other obligor or Affiliate of either thereof, has the right so to act with respect to such Bonds and that the pledgee is not the Company or any other obligor upon the Bonds or any Affiliate of the Company or of such other obligor; and

(ii)        the Principal amount of a Discount Bond that shall be deemed to be Outstanding for such purposes shall be the amount of the Principal thereof that would be due and payable as of the date of such determination upon a declaration that the Principal of such Discount Bond is due and payable immediately pursuant to Section 11.03.

For purposes of determining whether Bonds are owned by an Affiliate of the Company, any obligor other than the Company, or any Affiliate of such obligor, the Trustee may conclusively rely on a certificate of an Authorized Executive Officer of the Company.

“Paying Agent” means any Person, including the Company, authorized by the Company to pay the Principal of or interest, if any, on any Bonds on behalf of the Company.

“Periodic Offering” means an offering of Bonds of a series from time to time, any or all of the specific terms of which Bonds, including but not limited to the rate or rates of interest, if any, thereon, the stated maturity or maturities thereof and the redemption and repurchase provisions, if any, with respect thereto, are to be determined by the Company or its agents at or about the time of the issuance of such Bonds in the manner specified in this Indenture and the Supplemental Indenture which creates and establishes such series of Bonds, and Company Orders pursuant to such Supplemental Indenture.

“Permissible Encumbrances” means as of any time any of the following:

(a)        the Lien of this Indenture and all Liens junior thereto not otherwise prohibited under the terms of any Supplemental Indenture;

(b)        any Prior Lien not otherwise listed in this definition of Permissible Encumbrances if (i) at the time of the acquisition by the Company of the Mortgaged Property subject to such Prior Lien, the lesser of the Cost or Fair Value of such Mortgaged Property is at least equal to 133-1/3% of the principal amount of the obligations secured by such Prior Lien, (ii) all other Liens on such Mortgaged Property, except for Permissible Encumbrances, shall have been discharged at the time of such acquisition, and (iii) such other Prior Lien shall not attach to any other Mortgaged Property other than pursuant to an after-acquired property clause of such Prior Lien; provided, however, that if the Company, as a Successor Entity, shall have executed a Supplemental Indenture relating thereto in accordance with Article 12, the extension of such Prior Lien to Mortgaged Property subsequently acquired by the Company shall be permitted notwithstanding the limitation expressed in this clause (b)(iii);

(c)        Liens for taxes or assessments by governmental bodies not yet due or the payment of which is being contested in good faith by the Company and for which the Company shall have set aside on its books adequate reserves to the extent required by GAAP;

(d)        any right of any municipal or other governmental body or agency, by virtue of any franchise, grant, license, permit, contract or statute, to occupy, purchase or designate a purchaser of, or to order the sale of, any Mortgaged Property upon payment of reasonable compensation therefor, or to modify or terminate any franchise, grant, license, permit, contract or other right, or to regulate the property and business, of the Company;

(e)        Liens incidental to construction or current operations of the Company which are not delinquent or, whether or not delinquent, are being contested in good faith by the Company and for which the Company shall have set aside on its books adequate reserves for the payment thereof to the extent required by GAAP;