Document:

sjgloanagreement.htm

    Exhibit (10)(i)(ii)

      

      
        
          
            
              
                
                  
                    	
                             

                            LOAN
      AGREEMENT

                             

                          

                  

                

              

            

          

        

      

      

       

      

       

      SOUTH
JERSEY GAS COMPANY

       

      

       

      and

       

      

       

      TORONTO
DOMINION (NEW YORK) LLC

       

      

       

      

       

      Dated as
of December 15, 2008

       

      
        
          
                                                                          

          

           

        

        
          
          

          
            

          

        

        
           

        

      

      

       

      
        
          	
                  TABLE
      OF CONTENTS

                	 
      
	 
      	
                  Page

                
	
                  SECTION
      I. DEFINITIONS AND INTERPRETATION

                   

                	
                  1

                
	 
      	
                  1.1

                	
                  Terms
      Defined

                	
                  1

                
	 
      	
                  1.2

                	
                  Accounting
      Principles

                	
                  12

                
	 
      	
                  1.3

                	
                  Construction

                   

                	
                                  13

                
	
                  SECTION
      II. THE LOANS

                   

                	
                  13

                
	 
      	
                  2.1

                	
                  Revolving
      Credit – Description:

                	
                  13

                
	 
      	
                  2.2

                	
                  [Intentionally
      Omitted]

                	
                  13

                
	 
      	
                  2.3

                	
                  [Intentionally
      Omitted]

                	
                  13

                
	 
      	
                  2.4

                	
                  Loans
      and Payments:

                	
                  13

                
	 
      	
                  2.5

                	
                  Interest:

                	
                  14

                
	 
      	
                  2.6

                	
                  Additional
      Interest Provisions:

                	
                  15

                
	 
      	
                  2.7

                	
                  Fees
      and Charges:

                	
                  16

                
	 
      	
                  2.8

                	
                  Prepayments

                	
                  16

                
	 
      	
                  2.9

                	
                  [Intentionally
      Omitted]

                	
                  16

                
	 
      	
                  2.10

                	
                  Capital
      Adequacy

                	
                  16

                
	 
      	
                  2.11

                	
                  Funding
      Indemnity

                	
                  17

                
	 
      	
                  2.12

                	
                  Inability
      to Determine Interest Rate

                	
                  17

                
	 
      	
                  2.13

                	
                  Illegality

                	
                  17

                
	 
      	
                  2.14

                	
                  Requirements
      of Law:

                   

                	
                  18

                
	
                  SECTION
      III. [INTENTIONALLY OMITTED]

                   

                	
                  18

                
	
                  SECTION
      IV. CLOSING AND CONDITIONS PRECEDENT TO LOANS

                   

                	
                  19

                
	 
      	
                  4.1

                	
                  Resolutions,
      Opinions, and Other Documents

                	
                  19

                
	 
      	
                  4.2

                	
                  Absence
      of Certain Events

                	
                  19

                
	 
      	
                  4.3

                	
                  Warranties
      and Representations at Closing

                	
                  20

                
	 
      	
                  4.4

                	
                  Compliance
      with this Agreement

                	
                  20

                
	 
      	
                  4.5

                	
                  Authorized
      Officers’ Certificate

                	
                  20

                
	 
      	
                  4.6

                	
                  Closing

                	
                  20

                
	 
      	
                  4.7

                	
                  Waiver
      of Rights

                	
                  20

                
	 
      	
                  4.8

                	
                  Conditions
      for Future Loans

                	
                  20

                

        

      

       

       

      
        
          i

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      
        
          	
                  SECTION
      V. REPRESENTATIONS AND WARRANTIES

                   

                	
                  21

                
	 
      	
                  5.1

                	
                  Organization
      and Validity

                	
                  21

                
	 
      	
                  5.2

                	
                  Pending
      Litigation

                	
                  22

                
	 
      	
                  5.3

                	
                  Financial
      Statements

                	
                  22

                
	 
      	
                  5.4

                	
                  Investment
      Company Status

                	
                  22

                
	 
      	
                  5.5

                	
                  No
      Default or Event of Default

                	
                  22

                
	 
      	
                  5.6

                	
                  Liens

                	
                  22

                
	 
      	
                  5.7

                	
                  Documentation

                	
                  22

                
	 
      	
                  5.8

                	
                  Government
      Regulations, Etc.

                	
                  23

                
	 
      	
                  5.9

                	
                  Taxes

                	
                  23

                
	 
      	
                  5.10

                	
                  Solvency

                	
                  23

                
	 
      	
                  5.11

                	
                  Capital
      Stock

                	
                  24

                
	 
      	
                  5.12

                	
                  Title
      to Properties

                	
                  24

                
	 
      	
                  5.13

                	
                  Anti-Terrorism
      Laws

                   

                	
                  24

                
	
                  SECTION
      VI. BORROWER’S AFFIRMATIVE COVENANTS

                   

                	
                  24

                
	 
      	
                  6.1

                	
                  Preservation
      of Existence, Etc.

                	
                  24

                
	 
      	
                  6.2

                	
                  Maintenance
      of Properties, Etc.

                	
                  24

                
	 
      	
                  6.3

                	
                  Ownership

                	
                  24

                
	 
      	
                  6.4

                	
                  Compliance
      with Material Contractual Obligations, Laws, Etc.

                	
                  24

                
	 
      	
                  6.5

                	
                  Insurance

                	
                  25

                
	 
      	
                  6.6

                	
                  Visitation
      Rights; Keeping of Books

                	
                  25

                
	 
      	
                  6.7

                	
                  Transactions
      with Affiliates

                	
                  25

                
	 
      	
                  6.8

                	
                  Use
      of Proceeds

                	
                  25

                
	 
      	
                  6.9

                	
                  Loan
      Documents

                	
                  25

                
	 
      	
                  6.10

                	
                  Risk
      Management

                	
                  25

                
	 
      	
                  6.11

                	
                  OFAC
      Compliance

                	
                  25

                
	 
      	
                  6.12

                	
                  Further
      Assurances

                	
                  25

                
	 
      	
                  6.13

                	
                  Reporting
      Requirements

                	
                  26

                
	 
      	
                  6.14

                	
                  Financial
      Covenants

                	
                  27

                
	 
      	
                  6.15

                	
                  Replacement
      Financing

                   

                	
                  27

                
	
                  SECTION
      VII. BORROWER’S NEGATIVE COVENANTS:

                   

                	
                  28

                
	 
      	
                  7.1

                	
                  Liens,
      Etc

                	
                  28

                
	 
      	
                  7.2

                	
                  Indebtedness

                	
                  28

                
	 
      	
                  7.3

                	
                  Obligation
      to Ratably Secure

                	
                  28

                
	 
      	
                  7.4

                	
                  Mergers,
      Etc

                	
                  28

                
	 
      	
                  7.5

                	
                  Sale
      of Assets, Etc

                	
                  28

                

        

      

       

       

      
        
          ii

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      
        
          
            
              	 
      	
                      7.6

                    	
                      Restricted
      Investments

                    	
                      28

                    
	 
      	
                      7.7

                    	
                      New
      Business

                    	
                      28

                    
	 
      	
                      7.8

                    	
                      Distributions

                    	
                      28

                    
	 
      	
                      7.9

                    	
                      Compliance
      with ERISA

                    	
                      29

                    
	 
      	
                      7.10

                    	
                      Constituent
      Documents, Etc

                    	
                      29

                    
	 
      	
                      7.11

                    	
                      Fiscal
      Year

                       

                    	
                      29

                    
	
                      SECTION
      VIII. DEFAULT

                       

                    	
                      29

                    
	 
      	
                      8.1

                    	
                      Events
      of Default

                    	
                      29

                    
	 
      	
                      8.2

                    	
                      Upon
      an Event of Default

                    	
                      31

                    
	 
      	
                      8.3

                    	
                      Nature
      of Remedies

                    	
                      31

                    
	 
      	
                      8.4

                    	
                      Set-Off:

                       

                    	
                      31

                    
	
                      SECTION
      IX. MISCELLANEOUS

                       

                    	
                      32

                    
	 
      	
                      9.1

                    	
                      Governing
      Law

                    	
                      32

                    
	 
      	
                      9.2

                    	
                      Integrated
      Agreement

                    	
                      32

                    
	 
      	
                      9.3

                    	
                      Waiver

                    	
                      32

                    
	 
      	
                      9.4

                    	
                      Indemnity:

                    	
                      32

                    
	 
      	
                      9.5

                    	
                      Time

                    	
                      33

                    
	 
      	
                      9.6

                    	
                      Expenses
      of Lender

                    	
                      33

                    
	 
      	
                      9.7

                    	
                      Brokerage

                    	
                      33

                    
	 
      	
                      9.8

                    	
                      Notices:

                    	
                      34

                    
	 
      	
                      9.9

                    	
                      Headings

                    	
                      35

                    
	 
      	
                      9.10

                    	
                      Survival

                    	
                      35

                    
	 
      	
                      9.11

                    	
                      Successors
      and Assigns

                    	
                      35

                    
	 
      	
                      9.12

                    	
                      Duplicate
      Originals

                    	
                      35

                    
	 
      	
                      9.13

                    	
                      Modification

                    	
                      35

                    
	 
      	
                      9.14

                    	
                      Signatories

                    	
                      35

                    
	 
      	
                      9.15

                    	
                      Third
      Parties

                    	
                      35

                    
	 
      	
                      9.16

                    	
                      Discharge
      of Taxes, Borrower’s Obligations, Etc.

                    	
                      36

                    
	 
      	
                      9.17

                    	
                      Withholding
      and Other Tax Liabilities

                    	
                      36

                    
	 
      	
                      9.18

                    	
                      Consent
      to Jurisdiction

                    	
                      36

                    
	 
      	
                      9.19

                    	
                      Waiver
      of Jury Trial

                    	
                      36

                    
	 
      	
                      9.20

                    	
                      Consequential
      Damages

                    	
                      37

                    
	 
      	
                      9.21

                    	
                      Nonliability
      of Lender

                    	
                      37

                    
	 
      	 
      	 
      	 
      
	 
      	 
      	
                      SCHEDULES

                    	 
      
	
                      Schedule
      I

                    	
                      Ownership

                    	 
      
	
                      Schedule
      II

                    	
                      First
      Mortgage Notes

                    	 
      

            

          

        

      

      

      

      
        
          
            iii

          

           

        

        
          
          

          
            

          

        

        
           

        

      

      

      LOAN
AGREEMENT

       

      This Loan
Agreement (“Agreement”) is dated this 15th day of December, 2008, by and
between South
Jersey Gas Company (“Borrower”), a New Jersey corporation and Toronto
Dominion (New York) LLC (“Lender”).

       

      BACKGROUND

       

      A.           Borrower
desires to establish financing arrangements with Lender and Lender is willing to
make loans and extensions of credit to Borrower under the terms and provisions
hereinafter set forth.

       

      B.           The
parties desire to define the terms and conditions of their relationship in
writing.

       

      NOW,
THEREFORE, the parties hereto, intending to be legally bound, hereby agree as
follows:

       

      SECTION
I.  DEFINITIONS AND INTERPRETATION

       

      1.1           Terms
Defined: As used
in this Agreement, the following terms have the following respective
meanings:

       

      Adjusted LIBOR Rate –
For the LIBOR Interest Period for each LIBOR Rate Loan comprising part of the
same borrowing (including conversions, extensions and renewals), a per annum
interest rate determined pursuant to the following formula:

       

      Adjusted
LIBOR Rate     =     London Interbank Offered
Rate

                
1 – LIBOR Reserve Percentage

       

      Affiliate – With
respect to any Person, (a) any Person which, directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control
with, such Person, or (b) any Person who is a director or officer (i) of such
Person, (ii) of any Subsidiary of such Person, or (iii) of any person described
in clause (a) above.  For purposes of this definition, control of a
Person shall mean the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise.  Control may be by ownership, contract, or
otherwise.

       

      
        
          
          

           

        

        
          
          

          
            

          

        

        
           

        

      

      Applicable Margin –
For any Loan made to Borrower on any date, the rate per annum as set forth
below, determined by reference to the Corporate Credit Ratings:

       

      
        
          
            
              
                
                  
                    	
                            Level

                          	
                            Corporate
      Credit Rating

                          	
                            Applicable
      Base Rate Margin

                          	
                            Applicable
      LIBOR

                            Margin

                          
	
                            I

                          	
                            Greater
      than

                            BBB-/Baa3

                          	
                            0.000%

                          	
                            1.00%

                          
	
                            II

                          	
                            Less
      than or equal to BBB-/Baa3

                            or
      no rating

                          	
                            0.000%

                          	
                            1.25%

                          

                  

                

              

            

          

        

      

       

      Any
change in the Applicable Margin will be effective as of the date on which the
applicable Selected Rating Agency, as the case may be, announces the applicable
change in the Corporate Credit Ratings.  Borrower shall notify Lender
in writing promptly after becoming aware of any change in the Corporate Credit
Ratings.

       

      For
purposes of the foregoing, (i) if the Corporate Credit Ratings established or
deemed to have been established by the Selected Rating Agencies shall fall
within different “Levels”, the lower rating will apply; (ii) if only one of the
Selected Rating Agencies maintains Corporate Credit Ratings, then the rating of
such single rating agency will apply; and (iii) if the rating system of Moody’s,
S&P or Fitch shall change, or if Moody’s, S&P or Fitch shall cease to be
in the business of providing Corporate Credit Ratings, Borrower and Lender shall
negotiate in good faith to amend this definition to reflect such changed rating
system or the unavailability of ratings from Moody’s, S&P or Fitch, and,
pending the effectiveness of any such amendment, the Corporate Credit Ratings
shall be determined by reference to the Corporate Credit Ratings most recently
in effect prior to such change or cessation.

       

      Applicable Rate
:

       

      a.           in
the case of each Base Rate Loan, a rate per annum equal at all times to the sum
of the Base Rate plus the Applicable
Base Rate Margin in effect from time to time;

       

      b.           in
the case of each LIBOR Rate Loan comprising part of the same Loan, a rate per
annum during each LIBOR Interest Period equal at all times to the sum of the
Adjusted LIBOR Rate for such LIBOR Interest Period plus the Applicable
LIBOR Margin in effect from time to time during such LIBOR Interest
Period.

       

      Authorized Officer –
Any officer (or comparable equivalent) of Borrower authorized by specific
resolution of Borrower to request Loans or execute Quarterly Compliance
Certificates as set forth in the authorization certificate delivered to Lender
substantially in the form of Exhibit “A” attached hereto.

       

      Bank Affiliate –
With respect to Lender, any Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with
Lender.  For purposes of this definition, control of a Person shall
mean the power, direct or indirect, (x) to vote 25% or more of any class of
Capital Stock having ordinary voting power for the election
of directors of such Person or other Persons performing similar functions for
any such Person, or (y) to direct or cause the direction of the management and
policies of such Person whether by ownership of Capital Stock, contract or
otherwise.

       

      
        
          
          

           

        

        
          2

          
            

          

        

        
           

        

      

       

      Bankruptcy Code –
Title 11 of the United States Code entitled “Bankruptcy”, as now or hereinafter
in effect, or any successor statute.

       

      Base Rate – The
highest of (a) the “Prime Rate” of interest as published in the “Money Rates”
section of The Wall
Street Journal on the applicable date (or the highest “Prime Rate” if
more than one is published) as such rate may change from time to time; (b) the
Federal Funds Rate plus fifty (50) basis points; or (c) the Daily LIBOR Rate
plus one hundred (100) basis points.  If The Wall Street
Journal ceases to be published or goes on strike or is otherwise not
published, Lender may use a similar published prime or base rate.  The
Base Rate is not necessarily the lowest or best rate of interest offered by
Lender to any borrower or class of borrowers.

       

      Base Rate Loans –
That portion of the Loans accruing interest based on a rate determined by
reference to the Base Rate.

       

      Business Day – (i) A
day other than Saturday or Sunday when Lender is open for business in New York,
New York; or (ii) with respect to any LIBOR Rate Loan, any day which is a
Business Day as described in clause (i) and which is also a day for trading by
and between banks in dollar deposits in the London interbank
market.

       

      Capital Expenditures
– For any period, the aggregate of all expenditures made in respect of the
purchase, construction or other acquisition of fixed or capital assets,
determined in accordance with GAAP.

       

      Capital Stock – With
respect to any Person, any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) equity of such Person, including any preferred interest,
any limited or general partnership interest and any limited liability company
membership interest.

       

      Change in Control –
(a) Parent ceasing at any time to own at least 100% of the Capital Stock having
voting rights of Borrower, or (b) the occurrence of either of the following: (i)
any entity, person (within the meaning of Section 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) which theretofore
was beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of less
than 20% of Parent’s then outstanding common stock either (x) acquires shares of
common stock of Parent in a transaction or series of transactions that results
in such entity, person or group directly or indirectly owning beneficially 20%
or more of the outstanding common stock of Parent, or (y) acquires, by proxy or
otherwise, the right to vote for the election of directors, for any merger,
combination or consolidation of Parent or any of its direct or indirect
Subsidiaries, or, for any other matter or question, more than 20% of the then
outstanding voting securities of Parent; or (ii) 20% or more of the directors of
the board of directors of Parent fail to consist of Continuing
Directors.

       

      
        Closing – Section
4.6.

      

       

      
        
          
          

           

        

        
          3

          
            

          

        

        
           

        

      

       

      Closing Date –
Section 4.6.

       

      Consolidated – When
used with reference to any accounting term, the amount described by such
accounting term, determined on a consolidated basis in accordance with GAAP,
after elimination of intercompany items.

       

      Consolidated Total
Capitalization – The sum of (i) Indebtedness of Borrower and its
Consolidated Subsidiaries, plus (ii) the sum of the Capital Stock (excluding
treasury stock and capital stock subscribed for and unissued) and surplus
(including earned surplus, capital surplus, translation adjustment, the balance
of the current profit and loss account not transferred to surplus and
accumulated comprehensive other income) accounts of Borrower and its
Consolidated Subsidiaries appearing on a consolidated balance sheet of Borrower
and its Consolidated Subsidiaries, in each case prepared as of the date of
determination in accordance with GAAP, after eliminating all intercompany
transactions and all amounts properly attributable to minority interests, if
any, in the stock and surplus of Subsidiaries.

       

      Continuing Director –
With respect to any Person as of any date of determination, any member of the
board of directors of such Person who (a) was a member of such board of
directors on the Closing Date, or (b) was nominated for election or elected to
such board of directors with the approval of a majority of the Continuing
Directors who were members of such board at the time of such nomination or
election.

       

      Corporate Credit
Ratings – The ratings assigned to the corporate credit of Borrower by the
Selected Rating Agencies.

       

      Daily LIBOR Rate -
For any day, the rate per annum determined by Lender by dividing (x) the
Published Rate by (y) a number equal to 1.00 minus the percentage prescribed by
the Federal Reserve for determining the maximum reserve requirements with
respect to any eurocurrency funding by banks on such day.

       

      Default – Any event,
act, condition or occurrence which with notice, or lapse of time or both, would
constitute an Event of Default hereunder.

       

      Disclosure Documents
– Collectively, Borrower’s Annual Report on Form 10-K for the year ended
December 31, 2007, its Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2006, June 30, 2008 and September 30, 2008, and any Current Report on
Form 8-K delivered to Lender at least three (3) Business Days prior to the date
of this Agreement.

       

      Environmental Laws –
Any and all Federal, foreign, state, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees and any and all common law
requirements, rules and bases of liability regulating, relating to or imposing
liability or standards of conduct concerning pollution, protection of the
environment, or the impact of pollutants, contaminants or toxic or hazardous
substances on human health or the environment, as now or may at any time
hereafter be in effect.

       

      
        ERISA – The Employee
Retirement Income Security Act of 1974, as the same may be amended, from time to
time.

      

      
        
          
          

           

        

        
          4

          
            

          

        

        
           

        

      

       

      ERISA Affiliate – Any
Person which for purposes of Title IV of ERISA is a member of Borrower’s
controlled group, or under common control with Borrower, within the meaning of
Section 414 of the Code, and the regulations promulgated and rulings issued
thereunder.

       

      ERISA Event – (i) The
occurrence of a reportable event, within the meaning of Section 4043 of ERISA,
unless the 30-day notice requirement with respect thereto has been waived by the
PBGC; (ii) the provision by the administrator of any Plan of a notice of intent
to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any
such notice with respect to a plan amendment referred to in Section 4041(e) of
ERISA); (iii) the cessation of operations at a facility in the circumstances
described in Section 4062(e) of ERISA; (iv) the withdrawal by Borrower or an
ERISA Affiliate from a Multiemployer Plan during a plan year for which it was a
“substantial employer” as defined in Section 4001(a)(2) of ERISA; (v) the
failure by Borrower or any ERISA Affiliate to make a payment to a Plan required
under Section 302 of ERISA, which results in a lien pursuant to Section 302(f)
of ERISA; (vi) the adoption of an amendment to a Plan requiring the provision of
security to such Plan, pursuant to Section 307 of ERISA; or (vii) the
institution by the PBGC of proceedings to terminate a Plan, pursuant to Section
4042 of ERISA, or the occurrence of any event or condition which might
reasonably constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, a Plan by the
PBGC.

       

      Event of Default –
Section 8.1.

       

      Expenses – Section
9.6.

       

      Federal Funds Rate –
For any period, a fluctuating interest rate per annum equal for each day during
such period to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Lender of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by Lender
from three Federal funds brokers of recognized standing selected by
it.

       

      First Mortgage Notes
– Those First Mortgage Notes identified on Schedule II attached
hereto, and subsequent promissory notes or other evidences of indebtedness of
Borrower in each case secured by first mortgages on real property owned by
Borrower or its Subsidiaries.

       

      Fiscal Year – The
fiscal year of Borrower, January 1 to December 31.

       

      Fitch – Fitch
Ratings, Inc.

       

      
        GAAP – Generally
accepted accounting principles as in effect on the Closing Date applied in a
manner consistent with the most recent audited financial statements of Borrower
furnished to Lender and described in Section 5.3 herein.

      

      
        
          
          

           

        

        
          5

          
            

          

        

        
           

        

      

       

      Governmental Action –
All authorizations, consents, approvals, waivers, exceptions, variances, orders,
licenses, exemptions, publications, filings, notices to and declarations of or
with any Governmental Authority, other than routine reporting requirements the
failure to comply with which will not affect the validity or enforceability of
this Agreement or any other Loan Document or have a material adverse effect on
the transactions contemplated by this Agreement or any other Loan
Document.

       

      Governmental
Authority – Any federal, state or local government or political
subdivision, or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury, or
arbitration.

       

      Hazardous Materials –
Any petrochemical or petroleum products, any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or related or similar materials, asbestos or any material containing
asbestos, or any other substance or material as so defined and regulated by any
Federal, state or local environmental law, ordinance, rule, or regulation
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42
U.S.C.  Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C.  Sections 1801, et seq.),
and the Resource Conservation and Recovery Act, as amended (42
U.S.C.  Sections 6901, et seq.), and the regulations adopted and
publications promulgated pursuant thereto.

       

      Hedging Obligations –
With respect to any Person, the obligations of such Person under any interest
rate or currency swap agreement, interest rate or currency future agreement,
interest rate collar agreement, swap agreement (as defined in 11
U.S.C.  § 101), interest rate or currency hedge agreement, and any
put, call or other agreement or arrangement designed to protect such Person
against fluctuations in interest rates or currency exchange rates.

       

      Indebtedness – For
any Person, all obligations of such Person which in accordance with GAAP should
be classified on a balance sheet of such Person as liabilities of such Person,
and in any event shall include, without duplication, all (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations to pay the deferred purchase price of
property or services, (iv) obligations as lessee under leases which shall have
been or should be, in accordance with GAAP, recorded as capital leases, (v)
obligations as lessee under operating leases which have been recorded as
off-balance sheet liabilities, (vi) obligations under Hedging Obligations, (vii)
reimbursement obligations (contingent or otherwise) in respect of outstanding
letters of credit, (viii) indebtedness of the type referred to in clauses (i)
through (vi) above secured by (or for which the holder of such indebtedness has
an existing right, contingent or otherwise, to be secured by) any lien or
encumbrance on, or security interest in, property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such indebtedness,
and (ix) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (vii)
above.  Notwithstanding anything to the contrary set forth above,
Capital Stock, including Capital Stock having a preferred interest, shall not
constitute Indebtedness for purposes of this Agreement.

      
        
          
          

           

        

        
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      Interest Hedging
Instrument – Any documentation evidencing any interest rate swap,
interest “cap” or “collar” or any other interest rate hedging device or swap
agreement (as defined in 11 U.S.C.  § 101 et.  seq.)
between Borrower and Lender (or any Affiliate of Lender).

       

      IRS – Internal
Revenue Service.

       

      LIBOR Interest Period
– As to LIBOR Rate Loans, a period of fourteen days, one month, two months,
three months or six months, as selected by Borrower pursuant to the terms of
this Agreement (including continuations and conversions thereof); provided
however, (i) if any LIBOR Interest Period would end on a day which is not a
Business Day, such LIBOR Interest Period shall be extended to the next
succeeding Business Day (except that where the next succeeding Business Day
falls in the next succeeding calendar month, then on the next preceding Business
Day), (ii) no LIBOR Interest Period shall extend beyond the Revolving Credit
Maturity Date, and (iii) any LIBOR Interest Period with respect to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such LIBOR Interest Period) shall end on the last Business Day of the
relevant calendar month at the end of such LIBOR Interest Period.

       

      LIBOR Rate Loans –
That portion(s) of the Loans accruing interest based on a rate determined by
reference to the Adjusted LIBOR Rate.

       

      LIBOR Reserve
Percentage – For any day, that percentage (expressed as a decimal) which
is in effect from time to time under Regulation D, as such regulation may be
amended from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental, emergency,
special, or marginal reserves) applicable with respect to Eurocurrency
liabilities as that term is defined in Regulation D (or against any other
category of liabilities that includes deposits by reference to which the
interest rate of LIBOR Rate Loans is determined), whether or not Lender has any
Eurocurrency liabilities subject to such reserve requirement at that
time.  LIBOR Rate Loans shall be deemed to constitute Eurocurrency
liabilities and as such shall be deemed subject to reserve requirements without
benefits of credits for proration, exceptions or offsets that may be available
from time to time to Lender.  The Adjusted LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in the
LIBOR Reserve Percentage.

       

      
        Lien - Any interest
of any kind or nature in property securing an obligation owed to, or a claim of
any kind or nature in property by, a Person other than the owner of the
Property, whether such interest is based on the common law, statute, regulation
or contract, and including, but not limited to, a security interest or lien
arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt,
a lease, consignment or bailment for security purposes, a trust, or an
assignment.  For the purposes of this Agreement, Borrower shall be
deemed to be the owner of any Property which it has acquired or holds subject to
a conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.

         

        Loan Request –
Section 2.4(b)(ii).

      

      
 

      
        
          
          

           

        

        
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      Loans – The unpaid
balance of cash advances by Lender to Borrower under the Revolving Credit which
may be Base Rate Loans or LIBOR Rate Loans.

       

      Loan Documents –
Collectively, this Agreement, the Note, and all agreements, instruments and
documents executed and/or delivered in connection therewith, all as may be
supplemented, restated, superseded, amended or replaced from time to
time.

       

      London Interbank Offered
Rate – With respect to any LIBOR Rate Loan for the LIBOR Interest Period
applicable thereto, the rate of interest per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the British Bankers Association
LIBOR Rate (“BBA LIBOR”) as published by Bloomberg (or such other commercially
available source providing quotations of BBA LIBOR as designated by Lender from
time to time) at approximately 11:00 A.M. (London time) 2 Business Days prior to
the first day of such LIBOR Interest Period for a term comparable to such LIBOR
Interest Period; provided however, if more than one BBA LIBOR Rate is specified,
the applicable rate shall be the arithmetic mean of all such
rates.  If, for any reason, such rate is not available, the term
London Interbank Offered Rate shall mean, with respect to any LIBOR Rate Loan
for the LIBOR Interest Period applicable thereto, the rate of interest per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Lender
to be the average rates per annum at which deposits in dollars are offered for
such LIBOR Interest Period to major banks in the London Interbank market in
London, England at approximately 11:00 A.M. (London time) 2 Business Days
prior to the first day of such LIBOR Interest Period for a term comparable to
such LIBOR Interest Period.

       

      Material Adverse
Effect – A material adverse effect with respect to (a) the business,
assets, condition (financial or otherwise), liabilities (actual or contingent),
or prospects of (i) Borrower or (ii) Borrower and its Subsidiaries (taken as a
whole), or (b) Borrower’s ability to pay the Obligations in accordance with the
terms hereof, or (c) the validity or enforceability of this Agreement or any of
the other Loan Documents or the rights and remedies of Lender hereunder or
thereunder.

       

      Maximum Revolving Credit
Amount – The sum of Forty Million Dollars ($40,000,000), as such amount
may be reduced from time to time pursuant to Section 2.9.

       

      Moody’s – Moody’s
Investors Service, Inc., or any successor thereto.

       

      
        Multiemployer Plan –
A multiemployer plan, as defined in Section 4001(a)(3) of ERISA, which is
subject to Title IV of ERISA and to which Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions,
such plan being maintained pursuant to one or more collective bargaining
agreements.

         

        Note – The Revolving
Credit Note.

         

        Notice of
Conversion/Extension — A written notice of conversion of a LIBOR Rate
Loan to a Base Rate Loan, or of a Base Rate Loan to a LIBOR Rate Loan or
extension of a LIBOR Rate Loan, in each case substantially in the form of
Exhibit “C” attached hereto.

      

      
        
          
          

           

        

        
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      Obligations – All
debts, liabilities and obligations of every kind or nature at any time owing by
Borrower to Lender or any other subsidiary of Lender or Bank Affiliate, under
this Agreement, or any other existing or future instrument, document or
agreement, between Borrower or Lender or any other subsidiary of Lender or Bank
Affiliate which is related to or permitted under this Agreement, and whether
principal, interest, fees, indemnification obligations hereunder or Expenses
(specifically including interest accruing after the commencement of any
bankruptcy, insolvency or similar proceeding with respect to Borrower, whether
or not a claim for such post-commencement interest is allowed), including,
without limitation, debts, liabilities and obligations in respect of the
Revolving Credit, and any extensions, modifications, substitutions, increases
and renewals thereof; any amount payable by Borrower or any Subsidiary of
Borrower pursuant to an Interest Hedging Instrument; the payment of all amounts
advanced by Lender or any other subsidiary of Lender or Bank Affiliate to
preserve, protect and enforce rights hereunder; and all Expenses incurred by
Lender or any other subsidiary of Lender or Bank Affiliate.  Without
limiting the generality of the foregoing, Obligations shall include any other
debts, liabilities or obligations owing to Lender or any other subsidiary of
Lender or Bank Affiliate in connection with any lockbox, cash management, or
other services (including electronic funds transfers or automated clearing house
transactions) provided by Lender or any other subsidiary of Lender or Bank
Affiliate to Borrower.

       

      OFAC – Section
5.13.

       

      Parent – South Jersey
Industries, Inc.

       

      PBGC – The Pension
Benefit Guaranty Corporation.

       

      Permitted
Indebtedness – Any of the following:

       

      (1)           Indebtedness
under this Agreement;

       

      (2)           Indebtedness
of Borrower under the First Mortgage Notes existing as of the Closing Date and
as identified on Schedule II attached hereto, and subsequent First Mortgage
Notes, so long as before and immediately after the incurrence of such
Indebtedness, Borrower is in compliance with Section 6.14;

       

      (3)           Any
Indebtedness of Borrower so long as before and immediately after the incurrence
of such Indebtedness, Borrower is in compliance with Section 6.14;

       

      
        (4)           Indebtedness
of Borrower under Hedging Obligations covering a notional amount not to exceed
the face amount of outstanding Indebtedness.

         

        Permitted Investments
– (1) Noncallable, direct general obligations of, or obligations the payment of
the principal of and interest on which are unconditionally guaranteed by, the
United States of America; (2) bonds, participation certificates or other
obligations of Federal National Mortgage Association, Government National
Mortgage Association and Federal Home Loan Mortgage Corporation which are owned
as of the Closing Date; (3) certificates of deposit, bankers’ acceptances or
other obligations issued by commercial banks which are fully insured by the
Federal Deposit Insurance Corporation or certificates of deposit, bankers’
acceptances or other deposit obligations issued by commercial
banks whose unsecured obligations are rated in one of the two highest rating
categories by Moody’s or S&P; (4) obligations issued or guaranteed by a
state or political subdivision of a state rated in one of the two highest rating
categories by Moody’s or S&P; or (5) any other investments permitted under
this Agreement and which Lender has approved in writing.

         

      

      
        
          
          

           

        

        
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      Permitted Lien – With
respect to any Person, any of the following:

       

      (1)           Liens
for taxes, assessments or governmental charges not delinquent or being contested
in good faith and by appropriate proceedings and for which adequate reserves in
accordance with GAAP are maintained on such Person’s books;

       

      (2)           Liens
arising out of deposits in connection with workers’ compensation, unemployment
insurance, old age pensions or other social security or retirement benefits
legislation;

       

      (3)           Deposits
or pledges to secure bids, tenders, contracts (other than contracts for the
payment of money), leases, statutory obligations, surety and appeal bonds, and
other obligations of like nature arising in the ordinary course of such Person’s
business;

       

      (4)           Liens
imposed by law, such as mechanics’, workers’, materialmen’s, carriers’ or other
like liens arising in the ordinary course of such Person’s business which secure
the payment of obligations which are not past due or which are being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP are maintained on such Person’s
books;

       

      (5)           Rights
of way, zoning restrictions, easements and similar encumbrances affecting such
Person’s real property which do not materially interfere with the use of such
property;

       

      (6)           Liens
securing Permitted Indebtedness of the type described in clause (2) of
“Permitted Indebtedness”;

       

      (7)           Liens
securing Permitted Indebtedness, described in clause (3) of the definition of
“Permitted Indebtedness,” not in excess of $12,500,000 in the aggregate;
and

       

      
        (8)           Purchase
money security interests for the purchase of equipment to be used in Borrower’s
business, encumbering only the equipment so purchased, and which secures only
the purchase-money Indebtedness incurred to acquire the equipment so purchased,
which Indebtedness qualifies as Permitted Indebtedness.

         

        Person – An
individual, partnership, corporation, trust, limited liability company, limited
liability partnership, unincorporated association or organization, joint venture
or any other entity.

         

        Plan – A Single
Employer Plan or a Multiple Employer Plan.

         

        Property – Any
interest of Borrower in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.

         

      

      
        
          
          

           

        

        
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      Published Rate - The
rate of interest published each Business Day in The Wall Street
Journal “Money Rates” listing under the caption “London Interbank Offered
Rates” for a one month period (or, if no such rate is published therein for any
reason, the Published Rate shall be the eurodollar rate for a one month period
as published in another publication determined by Lender).

       

      Quarterly Compliance
Certificate – Section 6.13.

       

      Regulation D –
Regulation D of the Board of Governors of the Federal Reserve System comprising
Part 204 of Title 12, Code of Federal Regulations, as amended, and any successor
thereto.

       

      Requirement of Law –
As to any Person, each law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

       

      Revolving Credit –
Section 2.1(a).

       

      Revolving Credit Closing
Fee – Section 2.7(a).

       

      Revolving Credit
Exposure – At any time, the aggregate amount of all Revolving Credit
Loans made by Lender then outstanding.

       

      Revolving Credit Maturity
Date – December 14, 2009.

       

      Revolving Credit Note
– Section 2.1(b).

       

      S&P – Standard
& Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., or
any successor thereto.

       

      
        Selected Rating
Agencies – Any two of Moody’s, S&P, Fitch or any other nationally
recognized rating agency selected by Borrower from time to time; provided that
for any such selection to be valid, Borrower shall have notified Lender of such
selection prior to such selection taking effect and if Borrower has not notified
Lender of any such selection, then Borrower shall be deemed to have selected
Moody’s and S&P.

         

        Significant
Subsidiary – With respect to any Person, a Subsidiary which meets any of
the following conditions:

         

        (a)           such
Person’s and its other Subsidiaries’ investments in and advances to the
Subsidiary exceed 10% of the total assets of such Person and its Consolidated
Subsidiaries as of the end of the most recently completed fiscal
quarter;

         

        (b)           such
Person’s and its other Subsidiaries’ proportionate share (as determined by
ownership interests) of the total assets (after intercompany eliminations) of
the Subsidiary exceeds 10% of the total assets of such Person and its
Consolidated Subsidiaries as of the end of the most recently completed fiscal
quarter; or

      

      
        
          
          

           

        

        
          11

          
            

          

        

        
           

        

      

       

      (c)           such
Person’s and its other Subsidiaries’ proportionate share (as determined by
ownership interests) in the income from continuing operations before income
taxes, extraordinary items and cumulative effect of changes in accounting
principles of the Subsidiary exceeds 10% of such income of such Person and its
Consolidated Subsidiaries for the most recently completed fiscal
quarter.

       

      Single Employer Plan
– A single employer plan, as defined in Section 4001(a)(15) of ERISA, which is
subject to Title IV of ERISA and which (i) is maintained for employees of
Borrower or an ERISA Affiliate and no Person other than Borrower and its ERISA
Affiliates or (ii) was so maintained and in respect of which Borrower or an
ERISA Affiliate could have liability under Section 4069 of ERISA in the event
such plan has been or were to be terminated.

       

      Solvent – With
respect to any Person, that such Person (a) has capital sufficient to carry on
its business and transactions and all business and transactions in which it is
about to engage and is able to pay its debts as they mature, (b) owns property
having a value, both at fair valuation and at present fair saleable value,
greater than the amount required to pay its probable liabilities (including
contingencies), and (c) does not believe that it will incur debts or liabilities
beyond its ability to pay such debts or liabilities as they mature.

       

      Subsidiary – With
respect to any Person, any corporation or unincorporated entity of which more
than 50% of the outstanding capital stock (or comparable interest) having
ordinary voting power (irrespective of whether at the time capital stock (or
comparable interest) of any other class or classes of such corporation or entity
shall or might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned by said Person (whether directly or
through one of more other Subsidiaries).  In the case of an
unincorporated entity, a Person shall be deemed to have more than 50% of
interests having ordinary voting power only if such Person’s vote in respect of
such interests comprises more than 50% of the total voting power of all such
interests in the unincorporated entity.

       

      
        Total Common Equity –
The sum of the Capital Stock (excluding treasury stock and capital stock
subscribed for and unissued) and surplus (including earned surplus, capital
surplus, translation adjustment, the balance of the current profit and loss
account not transferred to surplus and accumulated comprehensive other income)
accounts of Borrower and its Consolidated Subsidiaries appearing on a
consolidated balance sheet of Borrower and its Consolidated Subsidiaries, in
each case prepared as of the date of determination in accordance with GAAP,
after eliminating all intercompany transactions and all amounts properly
attributable to minority interests, if any, in the stock and surplus of
Subsidiaries.

         

        Unused Revolving Credit
Commitment – At any particular time, an amount equal to the excess, if
any, of the Maximum Revolving Credit Amount at such time over the Revolving
Credit Exposure at such time.

         

      

      
        
          
          

           

        

        
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        1.2           Accounting
Principles: Where
the character or amount of any asset or liability or item of income or expense
is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, this
shall be done in accordance with GAAP as in effect on the Closing Date, to the
extent applicable, except as otherwise expressly provided in this
Agreement.  If there are any changes in GAAP after the Closing Date
that would affect the computation of the financial covenants in Section 6.14,
such changes shall only be followed, with respect to such financial covenants,
from and after the date this Agreement shall have been amended to take into
account any such changes.

      

       

      1.3           Construction: No
doctrine of construction of ambiguities in agreements or instruments against the
interests of the party controlling the drafting shall apply to any Loan
Documents.

       

      SECTION
II.  THE LOANS

       

      2.1           Revolving Credit –
Description:

       

      a.           Subject
to the terms and conditions of this Agreement, Lender hereby establishes for the
benefit of Borrower a revolving credit facility (collectively, the “Revolving
Credit”) which shall include cash Loans extended by Lender to Borrower from time
to time hereunder.  The aggregate principal amount of Loans shall not
at any time exceed the Maximum Revolving Credit Amount.  Subject to
such limitation, the outstanding balance of Loans under the Revolving Credit may
fluctuate from time to time, to be reduced by repayments made by Borrower, to be
increased by future Loans which may be made by Lender, to Borrower, and, subject
to the provisions of Section 8 below, shall be due and payable on the Revolving
Credit Maturity Date.  The aggregate principal amount of Loans
outstanding at any time cannot exceed the Maximum Revolving Credit
Amount.

       

      
        b.           At
Closing, Borrower shall execute and deliver a promissory note to Lender for the
Maximum Revolving Credit Amount (“Revolving Credit Note”).  The
Revolving Credit Note shall evidence Borrower’s unconditional obligation to
repay Lender for all Loans made under the Revolving Credit, with interest as
herein provided.  Each Loan under the Revolving Credit shall be deemed
evidenced by the Revolving Credit Note, which is deemed incorporated herein by
reference and made part hereof.  The Revolving Credit Note shall be in
form and substance satisfactory to Lender.

         

        c.           The
term of the Revolving Credit shall expire on the Revolving Credit Maturity
Date.  On such date, unless having been sooner accelerated by Lender
pursuant to the terms hereof (i) all principal, interest and other fees,
Expenses and other Obligations owing under the Revolving Credit shall be due and
payable in full, and (ii) Lender’s commitment to make Loans under the Revolving
Credit shall terminate.  As of and after such date Borrower shall not
request and Lender shall not make any further Loan under the Revolving
Credit.

         

        2.2           [Intentionally
Omitted]

         

        2.3           [Intentionally
Omitted]

         

        
 

      

      
        
          
          

           

        

        
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        2.4           Loans and
Payments:

         

        a.           Except
to the extent otherwise set forth in this Agreement (or in the case of an
Interest Hedging Instrument under the applicable agreements), all payments of
principal and of interest on the Revolving Credit, and all Expenses, fees,
indemnification obligations and all other charges and any other Obligations of
Borrower, shall be made to Lender at such office or account as Lender may direct
from time to time, in United States dollars, in immediately available
funds.  Lender shall have the unconditional right and discretion
and Borrower hereby authorizes Lender) to charge Borrower’s operating
and/or deposit account(s) for all of Borrower’s Obligations as they become due
from time to time under this Agreement including, without limitation, interest,
principal, fees, indemnification obligations and reimbursement of
Expenses.  Alternatively, Lender may in its sole and absolute
discretion (and Borrower hereby authorizes Lender to) make a Loan under the
Revolving Credit in a sum sufficient to pay all interest accrued and payable on
the Obligations and to pay all costs, fees and Expenses owing
hereunder.  Any payments received prior to 2:00
p.m.  Eastern time on any Business Day shall be deemed received on
such Business Day.  Any payments (including any payment in full of the
Obligations), received after 2:00 p.m.  Eastern time on any Business
Day shall be deemed received on the immediately following Business
Day.

      

       

      b.           Loans
which may be made by Lender from time to time under the Revolving Credit shall
be made available by crediting such proceeds to Borrower’s operating account
with Lender or such other account designated by Borrower to Lender in
writing.

       

      i.           All
Loans requested by Borrower under the Revolving Credit that are (a) LIBOR Rate
Loans must be in the minimum amount of One Million Dollars ($1,000,000) and
integral multiples of Five Hundred Thousand Dollars ($500,000) in excess thereof
and (b) Base Rate Loans must be in the minimum amount of Five Hundred Thousand
Dollars ($500,000) and integrated multiples of One Hundred Thousand Dollars
($100,000) in excess thereof.

       

      
        ii.           All
Loans requested by Borrower under the Revolving Credit are to be in writing
pursuant to a written request (“Loan Request”) executed by an Authorized Officer
in the form of Exhibit ”B” attached hereto.  Requests for Base
Rate Loans must be requested by 11:00 A.M., Eastern time, on the date such Loan
is to be made.  Requests for LIBOR Rate Loans must be requested three
(3) Business Days in advance and must specify the amount of the LIBOR Rate Loan
and the LIBOR Interest Period.  If no LIBOR Interest Period is
specified, the LIBOR Interest Period shall be deemed to be a one month
period.

         

        iii.           Upon
receiving a request for a Loan in accordance with subparagraph (ii) above, and
subject to the conditions set forth in this Agreement, Lender shall make the
requested Loan available to Borrower as soon as is reasonably practicable
thereafter on the day the requested Loan is to be made.

         

        2.5           Interest:

         

        a.           The
unpaid principal balance of Loans under the Revolving Credit shall bear
interest, subject to the terms hereof, at a per annum rate equal to the
Applicable Rate.

         

        b.           Interest
on Base Rate Loans shall be payable quarterly, in arrears, on January 1, April
1, July 1 and October 1, and on the Revolving Credit Maturity
Date.  Interest on LIBOR Rate Loans shall be payable on the last day
of the applicable LIBOR Interest Period or, in the case of a LIBOR Interest
Period which is six months, at the end of the three month period, and on the
Revolving Credit Maturity Date.

      

      
 

      
        
          
          

           

        

        
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      c.           Borrower
may, in the case of Revolving Credit Loans, elect from time to time to convert
Base Rate Loans to LIBOR Rate Loans, by delivering a Notice of
Conversion/Extension to Lender at least three (3) Business Days prior to the
proposed date of conversion.  In addition, Borrower may elect from
time to time to convert all or any portion of a LIBOR Rate Loan to a Base Rate
Loan by giving Lender irrevocable written notice thereof by 12:00 noon one (1)
Business Day prior to the proposed date of conversion.  LIBOR Rate
Loans may only be converted to Base Rate Loans on the last day of the applicable
LIBOR Interest Period.  If the date upon which a LIBOR Rate Loan is to
be converted to a Base Rate Loan is not a Business Day, then such conversion
shall be made on the next succeeding Business Day and during the period from
such last day of a LIBOR Interest Period to such succeeding Business Day such
Loan shall bear interest as if it were a Base Rate Loan.  All or any
part of outstanding Base Rate Loans may be converted as provided herein;
provided that no Loan may be converted into a LIBOR Rate Loan when any Default
or Event of Default has occurred and is continuing.

       

      
        d.           Borrower
may continue any LIBOR Rate Loans upon the expiration of a LIBOR Interest Period
with respect thereto by delivering a Notice of Conversion/Extension to Lender at
least three (3) Business Days prior to the proposed date of extension; provided
that no LIBOR Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, in which case such Loan shall be
automatically converted to a Base Rate Loan at the end of the applicable LIBOR
Interest Period with respect thereto.  If Borrower shall fail to give
timely notice of an election to continue a LIBOR Rate Loan, or the continuation
of LIBOR Rate Loans is not permitted hereunder, each such LIBOR Rate Loan shall
be automatically converted to a Base Rate Loan at the end of the applicable
LIBOR Interest Period with respect thereto.

         

        e.           Borrower
may not have more than four (4) LIBOR Rate Loans outstanding at any
time.

         

        2.6           Additional Interest
Provisions:

         

        a.           Interest
on the LIBOR Rate Loans shall be calculated on the basis of a year of three
hundred sixty (360) days but charged for the actual number of days
elapsed.  Interest on the Base Rate Loans shall be calculated on the
basis of a year of three hundred sixty five (365) or three hundred sixty six
(366) days, as the case may be, but charged for the actual number of days
elapsed.

         

        b.           After
the occurrence and during the continuance of an Event of Default hereunder, the
per annum effective rate of interest on all outstanding principal under the
Loans, shall be increased by two hundred (200) basis points.  All such
increases may be applied retroactively to the date of the occurrence of the
Event of Default.  Borrower agrees that the default rate payable to
Lender is a reasonable estimate of Lender’s damages and is not a
penalty.

         

        c.           All
contractual rates of interest chargeable on outstanding principal under the
Loans shall continue to accrue and be paid even after Default, an Event of
Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of
any kind or the happening of any event or occurrence similar or
dissimilar.

         

      

      
 

      
        
          
          

           

        

        
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        d.           In
no contingency or event whatsoever shall the aggregate of all amounts deemed
interest hereunder and charged or collected pursuant to the terms of this
Agreement exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable
hereto.  In the event that such court determines Lender has charged or
received interest hereunder in excess of the highest applicable rate, Lender
shall apply, in its sole discretion, and set off such excess interest received
by Lender against other Obligations due or to become due and such rate shall
automatically be reduced to the maximum rate permitted by such law.

         

        e.           Borrower
shall not request and Lender shall not make or continue, or convert any Loan to
a LIBOR Rate Loan while a Default or an Event of Default exists.

         

        
                
2.7           Fees and
Charges:

           

          a.           At
Closing, Lender shall have fully earned and Borrower shall unconditionally pay
to Lender, a non-refundable fee with respect to the Revolving Credit (“Revolving
Credit Closing Fee”) of Forty Thousand Dollars ($40,000), less amounts
previously paid thereon.

           

          b.           Borrower
hereby agrees to pay to Lender a facility fee (the “Facility Fee”), equal to the
average daily amount of the Unused Revolving Credit Commitment during the
preceding calendar quarter (or such shorter period commencing with the Closing
Date or ending on the Revolving Credit Maturity Date) multiplied by a rate
per annum equal to one eighth of one percent (0.125%), payable quarterly in
arrears on January 1, April 1, July 1 and October 1, and on the Revolving Credit
Maturity Date.  The Facility Fee due to Lender shall commence to
accrue on the Closing Date and shall cease to accrue on the Revolving Credit
Maturity Date.

           

          2.8           Prepayments:
Borrower may prepay the Revolving Credit in whole or in part at any time or from
time to time, without penalty or premium except as provided in Section
2.11.  Any prepayment shall be accompanied by all accrued and unpaid
interest, fees and Expenses, and shall first be applied to any Base Rate Loans
and then to LIBOR Rate Loans.

           

          2.9           Reduction of Revolving
Credit: Upon at
least five Business Days’ prior irrevocable written notice to Lender, Borrower
may at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Maximum Revolving Credit Amount; provided, however, that
(i) each partial reduction of the Maximum Revolving Credit Amount shall be in a
minimum principal amount of $1,000,000 or in integral multiples of $1,000,000 in
excess thereof, and (ii) the Maximum Revolving Credit Amount may not be reduced
or terminated if, after giving effect thereto and to any prepayments on the
Loans made on the effective date thereof, the aggregate amount of all Loans at
such time would exceed the Maximum Revolving Credit Amount at such
time.

           

        

      

      
        
          
          

           

        

        
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        2.10           Capital
Adequacy: If any
present or future law, governmental rule, regulation, policy, guideline,
directive or similar requirement (whether or not having the force of law)
imposes, modifies, or deems applicable any capital adequacy, capital maintenance
or similar requirement which affects the manner in which Lender allocates
capital resources to its commitments (including any commitments hereunder), and
as a result thereof, in the opinion of Lender, the rate of return on Lender’s
capital with regard to the Loans is reduced to a level below that which
Lender could have achieved but for such circumstances, then in such case and
upon notice from Lender to Borrower, from time to time, Borrower shall pay
Lender such additional amount or amounts as shall compensate Lender for such
reduction in Lender’s rate of return.  Such notice shall contain the
statement of Lender with regard to any such amount or amounts which shall, in
the absence of manifest error, be binding upon Borrower.  In
determining such amount, Lender may use any reasonable method of averaging and
attribution that it deems applicable.

      

       

           
2.11           Funding
Indemnity:
Borrower shall indemnify Lender, and hold Lender harmless from any loss,
damages, liability, or expense which Lender may sustain or incur as a
consequence of the making of a prepayment of Loans on a day which is not the
last day of a LIBOR Interest Period with respect thereto.  With
respect to such Loans, such indemnification shall equal the excess, if any, of
(i) the amount of interest which would have accrued on the amount so
prepaid for the period from the date of such prepayment at the applicable rate
of interest for such Loans provided for herein over (ii) the amount of
interest (as reasonably determined by Lender) which would have accrued to Lender
on such amount by placing such amount on deposit for a comparable period with
leading banks in the London interbank Eurodollar market.  This
covenant shall survive the termination of this Agreement, and the payment of the
Obligations.

       

      2.12           Inability to Determine
Interest Rate:
Notwithstanding any other provision of this Agreement, if Lender shall
reasonably determine (which determination shall be conclusive and binding absent
manifest error) that, (i) by reason of circumstances affecting the relevant
market, reasonable and adequate means do not exist for ascertaining the Adjusted
LIBOR Rate for a LIBOR Interest Period, or (ii) the Adjusted LIBOR Rate does not
adequately and fairly reflect the cost to Lender of funding LIBOR Rate Loans
that Borrower has requested be outstanding as a LIBOR Rate Loan during a LIBOR
Interest Period, Lender shall forthwith give telephone notice of such
determination, confirmed in writing, to Borrower at least two (2) Business Days
prior to the first day of such LIBOR Interest Period.  Unless Borrower
shall have notified Lender upon receipt of such telephone notice that it wishes
to rescind or modify its request regarding such LIBOR Rate Loans, any Loans that
were requested to be made as LIBOR Rate Loans shall be made as Base Rate Loans
and any Loans that were requested to be converted into or continued as LIBOR
Rate Loans shall remain as or be converted into Base Rate
Loans.  Until any such notice has been withdrawn by Lender, no further
Loans shall be made as, continued as, or converted into, LIBOR Rate Loans for
the LIBOR Interest Periods so affected.

       

      2.13           Illegality:
Notwithstanding any other provision of this Agreement, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
to Lender by the relevant Governmental Authority shall make it unlawful for
Lender to make or maintain LIBOR Rate Loans as contemplated by this Agreement,
or to obtain in the interbank Eurodollar market, the funds with which to make
such Loans, (a) Lender shall promptly notify Borrower thereof, (b) the
commitment of Lender hereunder to make LIBOR Rate Loans or continue LIBOR Rate
Loans as such shall forthwith be suspended until Lender shall give notice that
the condition or situation which gave rise to the suspension shall no longer
exist, and (c) Lender’s Loans then outstanding as LIBOR Rate Loans, if any,
shall be converted on the last day of the LIBOR Interest Period for such Loans,
or within such earlier period as required by law, to Base Rate
Loans.  Borrower hereby agrees promptly to pay Lender, upon its
demand, any additional amounts necessary to compensate Lender for actual and
direct costs (but not including anticipated profits) reasonably incurred by
Lender in connection with any repayment in accordance with this Section 2.13,
including but not limited to, any interest or fees payable by Lender to lenders
of funds obtained by it in order to make or maintain its LIBOR Rate Loans
hereunder.  A certificate as to any additional amounts payable
pursuant to this Section 2.13 submitted by Lender, to Borrower shall be
presumptive evidence of such amounts owing.  Lender agrees to use
reasonable efforts to avoid or to minimize
any amounts which may otherwise be payable pursuant to this Section 2.13;
provided however, that such efforts shall not cause the imposition on Lender of
any additional costs or legal or regulatory burdens deemed by Lender in its
reasonable discretion to be material.

       

       

      
        
          
          

           

        

        
          17

          
            

          

        

        
           

        

      

       

      2.14           Requirements of
Law:

       

      a.           If
the adoption of or any change in any Requirement of Law or in the interpretation
or application thereof or compliance by Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:

       

      i.           shall
subject Lender to any tax of any kind whatsoever with respect to any LIBOR Rate
Loan made by it, or change the basis of taxation of payments to Lender in
respect thereof (except for changes in the rate of tax on the overall net income
of Lender);

       

      ii.           shall
impose, modify, or hold applicable, any reserve, special deposit, compulsory
loan, or similar requirement against assets held by, deposits or other
liabilities in, or for the account of, advances, loans, or other extension of
credit (including participations therein) by, or any other acquisition of funds
by, any office of Lender which is not otherwise included in the determination of
the LIBOR Rate hereunder; or

       

      iii.           shall
impose on such Lender any other condition;

       

      iv.           and
the result of any of the foregoing is to materially increase the cost to Lender
of making or maintaining LIBOR Rate Loans, or to reduce any amount receivable
hereunder, or under any Note, then, in any such case, Borrower shall promptly
pay Lender, upon its demand, any additional amounts necessary to compensate
Lender for such additional costs or reduced amount receivable which Lender
reasonably deems to be material as determined by Lender, with respect to its
LIBOR Rate Loans.  A certificate as to any additional amounts payable
pursuant to this Section 2.14 submitted by Lender to Borrower shall be
presumptive evidence of such amounts owing.  Lender agrees to use
reasonable efforts to avoid, or to minimize, any amounts which might otherwise
be payable pursuant to this Section 2.14; provided however, that such efforts
shall not cause the imposition on Lender of any additional costs or legal
regulatory burdens deemed by Lender in good faith to be material.

       

      b.           The
agreements in this Section 2.14 shall survive the termination of this Agreement
and payment of the Obligations.

       

      SECTION
III.  [INTENTIONALLY OMITTED]

       

      
        
          
          

           

        

        
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      SECTION
IV.  CLOSING AND CONDITIONS PRECEDENT TO LOANS

       

      Closing
under this Agreement is subject to the following conditions precedent (all
instruments, documents and agreements to be in form and substance satisfactory
to Lender and Lender’s counsel):

       

      4.1           Resolutions, Opinions, and
Other Documents:
Borrower shall have delivered, or caused to be delivered to Lender the
following:

       

      a.           this
Agreement, the Note and each of the other Loan Documents all properly
executed;

       

      b.           each
of the other documents to be executed and/or delivered by Borrower or any other
Person pursuant to this Agreement;

       

      c.           certified
copies of (i) resolutions of Borrower’s board of directors or managing members
(as applicable) authorizing the execution, delivery and performance of this
Agreement, the Notes to be issued hereunder and each of the other Loan Documents
required to be delivered by any Section hereof and (ii) Borrower’s articles or
certificate of incorporation and by-laws;

       

      d.           an
incumbency certificate for Borrower identifying all Authorized Officers, with
specimen signatures;

       

      e.           a
certificate of good standing for Borrower, dated on or immediately prior to the
Closing Date, from the Secretary of State of the state of organization of
Borrower and from all states in which Borrower is required to obtain a
certificate of good standing or like certificate due to the nature of its
operations in such state;

       

      f.           a
written opinion of Borrower’s independent counsel addressed to Lender and
opinions of such other counsel as Lender deems reasonably
necessary;

       

      g.           such
financial statements (including all Disclosure Documents), reports,
certifications and other operational information as Lender may reasonably
require, satisfactory in all respects to Lender;

       

      h.           payment
by Borrower of all fees including, without limitation, Revolving Credit Closing
Fee, and Expenses associated with the Loans;

       

      i.           Insurance
certificates and policies as required under Section 6.5; and

       

      j.           such
other documents reasonably required by Lender.

       

      4.2           Absence of Certain
Events: At the
Closing Date, no Default or Event of Default hereunder shall have occurred and
be continuing, and no default or event of default shall have occurred and be
continuing under any existing Indebtedness of Borrower.

       

      
        
          
          

           

        

        
          19

          
            

          

        

        
           

        

      

      4.3           Warranties and
Representations at Closing: The
warranties and representations contained in Section 5 as well as any other
Section of this Agreement shall be true and correct in all respects on the
Closing Date with the same effect as though made on and as of that
date.  Borrower shall not have taken any action or permitted any
condition to exist which would have been prohibited by any Section
hereof.

       

      4.4           Compliance with this
Agreement:
Borrower shall have performed and complied with all agreements, covenants and
conditions contained herein including, without limitation, the provisions of
Sections 6 and 7 hereof, which are required to be performed or complied with by
Borrower before or at the Closing Date.

       

      4.5           Authorized Officers’
Certificate: Lender
shall have received a certificate dated the Closing Date and signed by an
Authorized Officer certifying that (i) all of the conditions specified in this
Section have been fulfilled, (ii) no Material Adverse Effect has occurred since
September 30, 2008, (iii) no action, proceeding, investigation, regulation or
legislation has been instituted, or, to Borrower’s knowledge, threatened or
proposed before any court, government agency or legislative body to enjoin,
restrain or prohibit, or to obtain damages in respect of, or which is related to
or arises out of this Agreement or any other Loan Documents or the consummation
of the transactions contemplated hereby or thereby or which could reasonably be
expected to have a Material Adverse Effect, and (iv) all governmental,
shareholder, member, partner and third party consents and approvals necessary in
connection with the transactions contemplated hereby have been received and are
in full force and effect, and no condition or requirement of law exists which
could reasonably be likely to restrain, prevent or impose any material adverse
condition on the transactions contemplated hereby.

       

      4.6           Closing: Subject
to the conditions of this Section 4, the Loans shall be made available on such
date (the “Closing Date”) and at such time as may be mutually agreeable to the
parties contemporaneously with the execution hereof (“Closing”) at the
Philadelphia, Pennsylvania offices of Ballard Spahr Andrews & Ingersoll,
LLP.

       

      4.7           Waiver of
Rights: By
completing the Closing hereunder, or by making Loans hereunder, Lender does not
thereby waive a breach of any warranty or representation made by Borrower or any
other requirement of Borrower hereunder or under any agreement, document, or
instrument delivered to Lender or otherwise referred to herein, and any claims
and rights of Lender resulting from any breach or misrepresentation by Borrower
are specifically reserved by Lender.

       

      4.8           Conditions for Future
Loans: The
making of Loans under the Revolving Credit in any form following the Closing
Date and the conversion of any Base Rate Loan to a LIBOR Rate Loan or
continuation of any LIBOR Rate Loan is subject to the following conditions
precedent (all instruments, documents and agreements to be in form and substance
satisfactory to Lender and its counsel) following the Closing Date:

       

                   
a.           This
Agreement and each of the other Loan Documents shall be effective;

       

                

        
          
            
            

             

          

          
            20

            
              

            

          

          
             

          

        

                b.           No
event or condition shall have occurred or become known to Borrower, or would
result from the making of any requested Loan, which could have a Material
Adverse Effect; provided, however, that such
condition precedent shall apply only to new Loans and shall not apply to the
conversion of any existing Base Rate Loan to a LIBOR Rate Loan or the
continuation of any existing LIBOR Rate Loan;

       

      c.           No
Default or Event of Default then exists or after giving effect to the making of
the Loan would exist;

       

      d.           Each
Loan is within and complies with the terms and conditions of this Agreement
including, without limitation, the notice provisions contained in Section 2.4
hereof;

       

      e.           No
Lien (other than a Permitted Lien) has been imposed on Borrower;
and

       

      f.           Each
representation and warranty set forth in Section 5 and any other Loan Document
in effect at such time (as amended or modified from time to time) is then true
and correct in all material respects as if made on and as of such date except to
the extent such representations and warranties are made only as of a specific
earlier date.

       

      SECTION
V.  REPRESENTATIONS AND WARRANTIES

       

      To induce
Lender to complete the Closing and make the Loans to Borrower under the
Revolving Credit, Borrower warrants and represents to Lender that:

       

      5.1           Organization and
Validity:

       

      a.           Each
of Borrower and its Subsidiaries is an entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization, as applicable and is duly qualified to do business in, and is in
good standing in, all other jurisdictions where the nature of its business or
the nature of property owned or used by it makes such qualification necessary,
except where such failure would not have a Material Adverse
Effect.  Each of Borrower and its Subsidiaries has all requisite
corporate (or other applicable) powers and authority to own or lease and operate
its properties and to carry on its business as now conducted and as proposed to
be conducted.

       

      b.           The
execution, delivery and performance by Borrower of this Agreement and each Loan
Document to which it is a party are within Borrower’s corporate (or other
applicable) powers, have been duly authorized by all necessary corporate (or
other applicable) action, do not contravene (i) Borrower’s certificate of
incorporation, (ii) any law, rule or regulation applicable to Borrower or (iii)
any contractual or legal restriction binding on or affecting Borrower, and will
not result in or require the imposition of any Lien on any property (including,
without limitation, accounts or contract rights) of Borrower, except as provided
in this Agreement and any other the Loan Document.

       

      
        c.           No
Governmental Action is required for the execution or delivery by Borrower of
this Agreement or any other Loan Document to which it is a party or for the
performance by Borrower of its obligations under this Agreement or any other
Loan Document other than those which have previously been duly obtained, are in
full force and effect, are not subject to any pending or, to the knowledge of
Borrower, threatened appeal or other proceeding seeking reconsideration and as
to which all applicable periods of time for review, rehearing or appeal with
respect thereto have expired.

      

      
 

      
        
          
          

           

        

        
          21

          
            

          

        

        
           

        

      

       

      d.           This
Agreement and each Loan Document to which Borrower is a party is a legal, valid
and binding obligation of Borrower party thereto, enforceable against Borrower
in accordance with its terms subject to the effect of bankruptcy, insolvency,
reorganization,  fraudulent
conveyance,  moratorium  and  other  similar  laws  of
general application affecting rights and remedies of creditors
generally.

       

      5.2           Pending
Litigation:  Except
as disclosed in the Disclosure Documents, there is no pending or, to Borrower’s
knowledge, threatened action or proceeding (including, without limitation, any
proceeding relating to or arising out of Environmental Laws) affecting Borrower
or any of its Subsidiaries before any court, governmental agency or arbitrator
that has a reasonable possibility of having a Material Adverse
Effect.

       

      5.3           Financial
Statements:  The
audited consolidated balance sheet of Borrower and its Consolidated
Subsidiaries, as at December 31, 2007, and the related consolidated statements
of income, retained earnings and cash flows of Borrower and its Consolidated
Subsidiaries for the fiscal year then ended, and the unaudited consolidated
balance sheet of Borrower and its Consolidated Subsidiaries as at September 30,
2008, and the related consolidated statements of income, retained earnings and
cash flows of Borrower and its Consolidated Subsidiaries for the nine (9) months
then ended, copies of which have been furnished to Lender, fairly present in all
material respects the financial condition of Borrower and its Consolidated
Subsidiaries as at such dates and the results of the operations of Borrower and
its Consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP consistently applied,  subject, solely in the
case of unaudited consolidated balance sheets, to normal year end
adjustments.  Since December 31, 2007, there has been no Material
Adverse Effect, or material adverse change in the facts and information
regarding such entities as represented to the Closing Date.

       

      5.4           Investment Company
Status:  Neither
Borrower nor any Subsidiary of Borrower is an “investment company” or a company
“controlled” by an “investment company”, within the meaning of the Investment
Company Act of 1940, as amended.

       

      5.5           No Default or Event of
Default:  No
event has occurred or is continuing which constitutes a Default or an Event of
Default, or which constitutes, or which with the passage of time or giving of
notice or both would constitute, a default or event of default by Borrower or
Subsidiary thereof under any material agreement or contract, judgment, decree or
order by which Borrower or any of its respective properties may be bound or
which would require Borrower or Subsidiary thereof to make any payment
thereunder prior to the scheduled maturity date therefore, where such default
could reasonably be expected to have a Material Adverse Effect.

       

      
        5.6           Liens:  None
of the properties or assets of Borrower is subject to any Lien, except Permitted
Liens.

         

        5.7           Documentation:  All
written information, reports and other papers and data produced by or on behalf
of Borrower and furnished to Lender were, at the time the same were so
furnished, complete and correct in all material respects.  No document
furnished or written statement made to Lender by Borrower in connection with the
negotiation, preparation
or execution of this Agreement or any other Loan Documents contains or will
contain any untrue statement of a fact material to the creditworthiness of
Borrower or its Subsidiaries or omits or will omit to state a fact necessary in
order to make the statements contained therein not
misleading.

      

      
        
          
          

           

        

        
          22

          
            

          

        

        
           

        

      

       

      5.8           Government Regulations,
Etc.:

       

      a.           Neither
Borrower nor its Subsidiaries is engaged in the business of extending credit for
the purpose of buying or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Loan will be used to buy or carry any margin stock or to extend
credit to others for the purpose of buying or carrying any margin
stock.

       

      b.           No
ERISA Event has occurred or is reasonably expected to occur with respect to any
Plan which reasonably could be expected to have a Material Adverse
Effect.  Since the actuarial valuation date specified in the most
recent Schedule B (Actuarial Information) to the annual report of Plans
maintained by Borrower (Form 5500 Series), if any, (i) there has been no
Material Adverse Effect to the funding status of the Plans referred to therein
and (ii) no “prohibited transaction” has occurred with respect
thereto.  Neither Borrower nor any of its respective ERISA Affiliates
has incurred nor reasonably expects to incur any material withdrawal liability
under ERISA to any Multiemployer Plan.

       

      c.           Except
as set forth in the Disclosure Documents, Borrower and its Subsidiaries are in
compliance in all material respects with all applicable Federal, state and local
statutes, rules, regulations, orders and other provisions of law relating to
Hazardous Materials, air emissions, water discharge, noise emission and liquid
disposal, and other environmental, health and safety matters, other than those
the non-compliance with which would not have a Material Adverse Effect (taking
into consideration all fines, penalties and sanctions that may be imposed
because of such non-compliance) or on the ability of Borrower to perform its
obligations under this Agreement or any other Loan Document to which Borrower is
a party.  Except as set forth in the Disclosure Documents, neither
Borrower nor any of its respective Subsidiaries has received from any
Governmental Authority any notice of any material violation of any such statute,
rule, regulation, order or provision.

       

      d.           The
issuance of, and the existence of, the Loans and the use of the proceeds thereof
will comply with all provisions of applicable law and regulation in all material
respects.

       

           
5.9           Taxes:  Borrower
and its Subsidiaries have filed all tax returns (Federal, state and local)
required to be filed and paid all taxes shown thereon to be due, including
interest and penalties, except to the extent that Borrower or any such
Subsidiary is diligently contesting any such taxes in good faith and by
appropriate proceedings, and for which adequate reserves for payment thereof
have been established.

      
         

        5.10           Solvency:  As
of the Closing Date, Borrower and each of its Subsidiaries will be
Solvent.

      

      
 

      
        
          
          

           

        

        
          23

          
            

          

        

        
           

        

      

       

      5.11           Capital
Stock:  The
capitalization of Borrower and each Subsidiary of Borrower consists of the
Capital Stock, authorized, issued and outstanding, of such classes and series,
with or without par value, described on Schedule I hereto.  All such
outstanding Capital Stock has been duly authorized and validly issued and are
fully paid and nonassessable.  Except as set forth in the Disclosure
Documents, there are no outstanding warrants, subscriptions, options,
securities, instruments or other rights of any type or nature whatsoever, which
are convertible into, exchangeable for or otherwise provide for or permit the
issuance of, Capital Stock of Borrower or any Subsidiary of Borrower or are
otherwise exercisable by any Person.

       

      5.12           Title to
Properties:  Borrower
and each Subsidiary of Borrower has good and marketable title to all assets and
other property purported to be owned by it.

       

      5.13           Anti-Terrorism
Laws:  Borrower
is not listed on the specially Designated Nationals and Blocked Persons List
maintained by the Office of Foreign Asset Control, Department of the Treasury
(“OFAC” pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25,
2001)), and/or any other list maintained pursuant to any of the rules and
regulations of OFAC or pursuant to any other applicable Executive Orders or
otherwise subject to sanction under an OFAC implemented regulation.

       

      SECTION
VI.  BORROWER’S AFFIRMATIVE COVENANTS

       

      Until the
Obligations have been finally and indefeasibly paid and satisfied in full, and
the Revolving Credit has been terminated, Borrower will, and will cause each of
its Subsidiaries, to:

       

      6.1           Preservation of Existence,
Etc.:  Preserve
and maintain, and cause each of its Subsidiaries to preserve and maintain, its
corporate or company, as applicable, existence, material rights (statutory and
otherwise) and franchises, and take such other action as may be necessary or
advisable to preserve and maintain its right to conduct its business in the
states where it shall be conducting its business, except where failure to do so
does not result in, or could not reasonably be expected to have, a Material
Adverse Effect.

       

      6.2           Maintenance of Properties,
Etc.:  Maintain,
and cause each of its Subsidiaries to maintain, good and marketable title to all
of its properties which are used or useful in the conduct of its business, and
preserve, maintain, develop and operate, and cause each of its Subsidiaries to
preserve, maintain, develop and operate, in substantial conformity with all laws
and material contractual obligations, all such properties in good working order
and condition, ordinary wear and tear excepted, except where such failure would
not have a Material Adverse Effect.

       

      
        6.3           Ownership:  Cause
Parent to own, at all times, 100% of the Capital Stock having voting rights of
Borrower.

         

        6.4           Compliance with Material
Contractual Obligations, Laws, Etc.:  Comply,
and cause each of its Subsidiaries to comply, with the requirements of all
material contractual obligations and all applicable laws, rules, regulations and
orders, the failure to comply with which could reasonably be expected to have a
Material Adverse Effect, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property except to the extent diligently
contested in good faith and by appropriate proceedings and for which adequate
reserves for the payment thereof have been established, and complying with the
requirements of all
applicable Federal, state and local statutes, rules, regulations, orders and
other provisions of law relating to Hazardous Materials, air emissions, water
discharge, noise emission and liquid disposal, and other environmental, health
and safety matters.

      

      
        
          
          

           

        

        
          24

          
            

          

        

        
           

        

      

       

      6.5           Insurance:  Maintain,
and cause each of its Subsidiaries to maintain, insurance with financially sound
and reputable insurance companies or associations in such amounts and covering
such risks as are usually carried by companies engaged in the same or similar
businesses and similarly situated.

       

      6.6           Visitation Rights; Keeping
of Books:  At
any reasonable time and from time to time, upon reasonable advance notice,
permit Lender or any agents or representatives thereof, to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of, Borrower and any of its Subsidiaries, and to discuss the affairs,
finances and accounts of Borrower and any of its Subsidiaries with any of their
respective officers or directors and with their respective independent certified
public accountants and keep proper books of record and account, in which full
and correct entries shall be made of all financial transactions and the assets
and liabilities of Borrower in accordance with GAAP.

       

      6.7           Transactions with
Affiliates:  Conduct,
and cause each of its Subsidiaries to conduct, all transactions otherwise
permitted under this Agreement with any of its Affiliates on terms that are fair
and reasonable and no less favorable to Borrower or such Subsidiary than it
would obtain in a comparable arm’s-length transaction with a Person not an
Affiliate.

       

      6.8           Use of
Proceeds:  Use
the proceeds of any Loan solely for funding Capital Expenditures and/or general
corporate purposes.

       

      6.9           Loan
Documents:  Perform
and comply in all material respects with each of the provisions of each Loan
Document to which it is a party.

       

      6.10           Risk
Management:  Perform
and comply in all material respects, and require its Subsidiaries to perform and
comply in all material respects, with any risk management policies developed by
Borrower, including such policies, if applicable, related to (i) the retail and
wholesale inventory distribution and trading procedures and (ii) dollar and
volume limits.

       

      
        6.11           OFAC
Compliance:  Comply
with any obligations that it may have under the USA Patriot Act, all laws and
executive orders administered by OFAC and all regulations promulgated and
executive orders having the force of law issued pursuant thereto, as amended or
supplemented from time to time (collectively, “AML and Anti-Terrorist
Acts”).  In the event that Borrower becomes aware that it is not in
compliance with any applicable AML and Anti-Terrorist Acts, Borrower shall
notify Lender and diligently take all actions required thereunder to become
compliant.

         

        6.12           Further
Assurances:  At
the expense of Borrower, promptly execute and deliver, or cause to be promptly
executed and delivered, all further instruments and documents, and take and
cause to be taken all further actions, that may be reasonably necessary or that
Lender may reasonably request, to enable Lender to enforce the terms and
provisions of this Agreement and the Loan Documents and to exercise their rights
and remedies hereunder.  In addition, Borrower will use all reasonable
efforts to duly obtain Governmental
Actions required from time to time on or prior to such date as the same may
become legally required, and thereafter to maintain all such Governmental
Actions in full force and effect, except where such failure would not have a
Material Adverse Effect.

      

      
        
          
          

           

        

        
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      6.13           Reporting
Requirements: Provide
to Lender:

       

      a.           as
soon as available and in any event within sixty (60) days after the end of each
of the first three quarters of each fiscal year of Borrower, a consolidated and
consolidating balance sheet of Borrower and its Consolidated Subsidiaries as at
the end of such quarter and consolidated and consolidating statements of income,
retained earnings and cash flows of Borrower and its Consolidated Subsidiaries
for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter, all in reasonable detail and duly certified by the
chief financial officer or the treasurer of Borrower as fairly presenting in all
material respects the financial condition of Borrower and its Consolidated
Subsidiaries as at such date and the results of operations of Borrower and its
Consolidated Subsidiaries for the periods ended on such date, except for normal
year end adjustments, all in accordance with GAAP consistently applied (for
purposes hereof delivery of Borrower’s appropriately completed Form 10-Q will be
sufficient in lieu of delivery of such consolidated balance sheet and
consolidated statements of income, retained earnings and cash flows), together
with a quarterly compliance certificate in the form of Exhibit “D” (each, a
“Quarterly Compliance
Certificate”), of the chief financial officer or the treasurer of
Borrower (A) demonstrating and certifying compliance by Borrower with the
covenants set forth in Section 6.14 and (B) stating that no Event of Default or
Default has occurred and is continuing or, if an Event of Default or Default has
occurred and is continuing, a statement as to the nature thereof and the action
which Borrower has taken and proposes to take with respect thereto;

       

      
        b.           as
soon as available and in any event within one hundred five (105) days after the
end of each fiscal year of Borrower, a copy of the annual report for such year
for Borrower and its Consolidated Subsidiaries, containing consolidated and
consolidating financial statements for such year certified by, and accompanied
by an unqualified opinion of, independent public accountants reasonably
acceptable to Lender (for purposes hereof, delivery of Borrower’s appropriately
completed Form 10-K will be sufficient in lieu of delivery of such financial
statements), together with a Quarterly Compliance Certificate, in the form of
Exhibit “D”, of the chief financial officer or the treasurer of Borrower (A)
demonstrating and certifying compliance by Borrower with the covenants set forth
in Section 6.14 and (B) stating that no Event of Default or Default has occurred
and is continuing or, if an Event of Default or Default has occurred and is
continuing, a statement as to the nature thereof and the action which Borrower
has taken and proposes to take with respect thereto;

         

        c.           as
soon as possible and in any event within five (5) days after the occurrence of
each Event of Default and each Default known to Borrower, a statement of the
chief financial officer of Borrower setting forth details of such Event of
Default or Default and the action which Borrower has taken and proposes to take
with respect thereto;

         

        d.           as
soon as possible and in any event within five (5) days after receipt thereof by
Borrower or any of its ERISA Affiliates from the PBGC copies of each notice
received by Borrower or such ERISA Affiliate of the PBGC’s intention to
terminate any Plan of Borrower or such ERISA Affiliate or to have a trustee
appointed to administer any such Plan;

      

      
 

      
        
          
          

           

        

        
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      e.           as
soon as possible and in any event within five (5) days after receipt thereof by
Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor, a copy of
each notice received by Borrower or such ERISA Affiliate concerning the
imposition of withdrawal liability in the amount of at least $1,000,000 pursuant
to Section 4202 of ERISA in respect of which Borrower or such ERISA Affiliate is
reasonably expected to be liable;

       

      f.           as
soon as possible and in any event within five (5) days after Borrower becomes
aware of the occurrence thereof, notice of all actions, suits, proceedings or
other events (A) of the type described in Section 5.2 or (B) for which Lender
will be entitled to indemnity under Section 9.4;

       

      g.           as
soon as possible and in any event within five (5) days after the sending or
filing thereof, copies of all material reports that Borrower sends to any of its
security holders, and copies of all reports and registration statements which
Borrower or any of its Subsidiaries files with the Securities and Exchange
Commission or any national securities exchange;

       

      h.           as
soon as possible and in any event within five (5) days after requested, such
other information respecting the business, properties, assets, liabilities
(actual or contingent), results of operations, prospects, condition or
operations, financial or otherwise, of Borrower or any Subsidiary thereof as
Lender may from time to time reasonably request; and

       

      
        i.           as
soon as possible and in any event within fifteen (15) days after the occurrence
of each ERISA Event, a statement of the chief financial officer of Borrower
setting forth details of such ERISA Event and the action which Borrower has
taken and proposes to take with respect thereto.

         

        Information
required to be delivered pursuant to this Section 6.13 shall be deemed to have
been delivered if such information shall be available on the website of the
Securities and Exchange Commission at http://www.sec.gov and Borrower shall have
notified Lender of the availability of all Form 10-Q and Form 10-K reports;
provided that, if requested by Lender, Borrower shall deliver a paper copy of
such information to Lender.  Information required to be delivered
pursuant to this Section 6.13 may also be delivered by electronic communications
pursuant to procedures reasonably approved by Lender.

         

        6.14           Financial
Covenants:

         

        a.           Borrower
will maintain at the end of each fiscal quarter a ratio of Indebtedness to
Consolidated Total Capitalization of Borrower and its Consolidated Subsidiaries
of not more than 0.65 to 1.0.

         

        b.           Borrower
will maintain at the end of each fiscal quarter, a minimum Total Common Equity
of at least $289,200,000.

         

      

      
        
          
          

           

        

        
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        6.15           Replacement
Financing:  At
least sixty (60) days prior to the Revolving Credit Maturity Date, Borrower
shall have received the written approval of the New Jersey Board of
Public Utilities regarding Borrower’s entry into long-term debt financing to
refinance, in whole, this Revolving Credit.

      

       

      SECTION
VII.  BORROWER’S NEGATIVE COVENANTS:

       

      Borrower
covenants that until all of the Obligations are paid and satisfied in full and
the Revolving Credit has been terminated, that Borrower shall not:

       

      7.1           Liens,
Etc:  Except
as permitted in Section 7.3, create, incur, assume, or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume, or suffer to exist, any
Lien other than Permitted Liens.

       

      7.2           Indebtedness:  Create
or suffer, or permit any Subsidiary to create or suffer, to exist any
Indebtedness except for Permitted Indebtedness.

       

      7.3           Obligation to Ratably
Secure:  Except
as permitted by Section 7.1, create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien other than a Permitted Lien,
in each case to secure or provide for the payment of Indebtedness, unless, on or
prior to the date thereof, Borrower shall have (i) pursuant to documentation
reasonably satisfactory to Lender, equally and ratably secured the Obligations
of Borrower under this Agreement by a Lien acceptable to Lender, and (ii) caused
the creditor or creditors, as the case may be, in respect of such Indebtedness
to have entered into an intercreditor agreement in form, scope and substance
reasonably satisfactory to Lender.

       

      
        7.4           Mergers,
Etc:  Merge
or consolidate with or into any Person, or permit any of its Subsidiaries to do
so, except that (i) any Subsidiary of Borrower may merge or consolidate with or
into, any other Subsidiary of Borrower and (ii) any Subsidiary of Borrower may
merge or consolidate with and into Borrower; provided, that Borrower is
the surviving corporation; provided, further, that in
each case, immediately after giving effect to such proposed transaction, no
Event of Default or Default would exist.

         

        7.5           Sale of Assets,
Etc:  Sell,
transfer, lease, assign or otherwise convey or dispose, or permit any Subsidiary
to sell, transfer, lease, assign or otherwise convey or dispose, of assets
(whether now owned or hereafter acquired), in any single transaction or series
of transactions, whether or not related having an aggregate book value in excess
of 10% of the Consolidated assets of Borrower and its Consolidated Subsidiaries,
except for dispositions of capital assets in the ordinary course of business as
presently conducted.

         

        7.6           Restricted
Investments:  Other
than in the ordinary course of business (i) make or permit to exist any loans or
advances to, or any other investment in, any Person except for investments in
Permitted Investments, or (ii) acquire any assets or property of any other
Person.

         

        7.7           New
Business:  Permit
Borrower or any of its Subsidiaries to enter into any business which is not
substantially similar to that existing on the Closing Date.

         

      

      
        
          
          

           

        

        
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        7.8           Distributions:  Pay
any dividends on or make any other distributions in respect of any Capital Stock
or redeem or otherwise acquire any such Capital Stock without in each instance
obtaining the prior written consent of Lender; provided, that (i) any
Subsidiary of Borrower may pay regularly scheduled dividends or make other
distributions to Borrower; (ii) if no Default or Event of Default exists
or would result therefrom, Borrower may pay distributions or dividends in either
cash or Capital Stock or may redeem or otherwise acquire Capital Stock, and
(iii) Borrower may cause the redemption or acquisition of Capital Stock having a
preferred interest only if (a) such redemption or acquisition is effected by the
proceeds of Capital Stock issued by Parent, or (b) such redemption or
acquisition is effected with proceeds from Permitted Indebtedness; provided, that before and
after such redemption or acquisition as described in (a) and (b) above, no
Default or Event of Default has occurred and is continuing.

      

       

      7.9           Compliance with
ERISA:  (i)
Permit to exist any “accumulated funding deficiency” (as defined in Section
412(a) of the Code), unless such deficiency exists with respect to a Multiple
Employer Plan or Multiemployer Plan and Borrower has no control over the
reduction or elimination of such deficiency, (ii) terminate, or permit any ERISA
Affiliate to terminate, any Plan of Borrower or such ERISA Affiliate so as to
result in any material liability of Borrower or ERISA Affiliate to the PBGC, or
(iii) permit to exist any occurrence of any reportable event (within the meaning
of Section 4043 of ERISA), or any other event or condition, which presents a
material risk of a termination by the PBGC of any Plan of Borrower or such ERISA
Affiliate and such a material liability of Borrower or ERISA Affiliate to the
PBGC.

       

            
7.10           Constituent Documents,
Etc:  Change
in any material respect the nature of its certificate of incorporation, by-laws,
or other similar documents, or accounting policies or accounting practices
(except as required or permitted by the Financial Accounting Standards Board or
GAAP).

       

      7.11           Fiscal
Year:  Change
its Fiscal Year.

       

      SECTION
VIII.  DEFAULT

       

      8.1           Events of
Default: Each of
the following events shall constitute an event of default (“Event of
Default”):

       

      a.           Borrower
shall fail to pay (i) any amount of principal when the same becomes due and
payable or (ii) any interest, fees, Expenses or any other amount payable
hereunder within five (5) Business Days of when the same becomes due and
payable; or

       

      b.           Any
representation or warranty made by or on behalf of Borrower in this Agreement or
any Loan Document or by or on behalf of Borrower (or any of its officers) in
connection with this Agreement or any Loan Document shall prove to have been
incorrect in any material respect when made or deemed made; or

       

      
        c.           (i)
Borrower shall fail to perform or observe any term, covenant or agreement
contained in Sections 6.1, 6.3, 6.5, 6.7, 6.8, 6.9, 6.10, 6.13, 6.14, 6.15, 7.1,
7.2, 7.3, 7.4, 7.5, 7.6, 7.7, or 7.8, or (ii) Borrower shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement (other
than obligations specifically set forth elsewhere in this Section 8.1) on its
part to be performed or observed if the failure to perform or observe such other
term, covenant or agreement, shall remain unremedied for thirty (30) days after
written notice thereof shall have been given to Borrower by Lender;
or

      

      
        
          
          

           

        

        
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      d.           Borrower
or any Significant Subsidiary thereof shall fail to pay any principal of or
premium or interest on any Indebtedness (other than Indebtedness incurred under
this Agreement) thereof in the aggregate (for all such Persons) in excess of
$15,000,000, when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Indebtedness; or any other event
shall occur or condition shall exist under any agreement or instrument relating
to any such Indebtedness and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the maturity of
such Indebtedness; or any such Indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or

       

      e.           Borrower
or any Significant Subsidiary thereof shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors, or
any proceeding shall be instituted by or against Borrower or a Significant
Subsidiary thereof seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it),
such proceeding shall remain undismissed or unstayed for a period of forty-five
(45) days, any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur or Borrower or a Significant
Subsidiary thereof shall consent to or acquiesce in any such proceeding; or
Borrower or a Significant Subsidiary thereof shall take any corporate action to
authorize any of the actions set forth above in this subsection (e);
or

       

      f.           Any
judgment or order for the payment of money in excess of $15,000,000 (in the
aggregate) shall be rendered against Borrower or any Significant Subsidiary
thereof and either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) there shall be any period of ten
(10) consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or

       

      
        g.           The
obligations of Borrower under this Agreement or any other Loan Document shall
become unenforceable, or Borrower, or any court or governmental or regulatory
body having jurisdiction over Borrower, shall so assert in writing or Borrower
or any of its Affiliates shall contest in any manner the validity or
enforceability thereof; or

         

        h.           Any
ERISA Event shall have occurred with respect to a Plan and, thirty (30) days
after notice thereof shall have been given to Borrower by Lender, (i) such ERISA
Event shall still exist and (ii) such ERISA Event is reasonably likely to result
in a liability or lien in excess of $15,000,000 against Borrower or any ERISA
Affiliate; or

      

      
        
          
          

           

        

        
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      i.           Borrower
or any Affiliate thereof as employer under a Multiemployer Plan shall have made
a complete or partial withdrawal from such Multiemployer Plan and the plan
sponsor of such Multiemployer Plan shall have notified such withdrawing employer
that such employer has incurred a withdrawal liability in an annual amount
exceeding $5,000,000; or

       

      j.           Any
Governmental Action shall be rescinded, revoked, otherwise terminated, or
amended or modified in any manner which is materially adverse to the interests
of Lender; or

       

      k.           A
Change in Control shall occur.

       

      8.2           Upon an Event of
Default.  Upon
the occurrence of an Event of Default, Lender may, by notice to
Borrower:

       

      a.           Acceleration; Termination of
Credit Facility.  Declare the principal of and interest on the
Revolving Credit, the Note and the Obligations (except for Hedging Obligations,
which shall be governed by the terms and conditions of the documents controlling
such obligations) at the time outstanding, and all other amounts owed to Lender
under this Agreement, to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything in this
Agreement to the contrary notwithstanding, and terminate the Revolving Credit
and any right of Borrower to request Loans thereunder; provided, that upon the
occurrence of an Event of Default specified in Section 8.1(e), the Revolving
Credit shall be automatically terminated and all Obligations (except for Hedging
Obligations, which shall be governed by the terms and conditions of the
documents controlling such obligations) shall automatically become due and
payable without presentment, demand, protest or other notice of any kind, all of
which are expressly waived, anything in this Agreement or in any other Loan
Document to the contrary notwithstanding.

       

      8.3           Nature of
Remedies: All
rights and remedies granted Lender hereunder and under the Loan Documents, or
otherwise available at law or in equity, shall be deemed concurrent and
cumulative, and not alternative remedies, and Lender may proceed with any number
of remedies at the same time until all Obligations are satisfied in
full.  The exercise of any one right or remedy shall not be deemed a
waiver or release of any other right or remedy, and Lender, upon or at any time
after the occurrence of an Event of Default, may proceed against Borrower, at
any time, under any agreement, with any available remedy and in any
order.

       

      
        8.4           Set-Off: 
In
addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents (each of which is also
then exercisable by Lender), upon or at any time after the occurrence and during
the continuance of an Event of Default, Lender (and any participant) shall have
and be deemed to have, without notice to Borrower, the immediate right of
set-off against any bank account of Borrower with Lender, or of Borrower with
any other subsidiary of Lender or Bank Affiliate or any participant and may
apply the funds or amount thus set-off against any of Borrower’s Obligations
hereunder.

         

        If any
bank account of Borrower with Lender, any other subsidiary of Lender or Bank
Affiliate or any participant is attached or otherwise liened or levied upon by
any third party, Lender (and such participant) shall have and be deemed to have,
without notice to Borrower, the immediate right of set-off and may apply the
funds or amount thus set-off against any of Borrower’s Obligations
hereunder.

      

      
        
          
          

           

        

        
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      SECTION
IX.  MISCELLANEOUS

       

      9.1           Governing
Law: THIS
AGREEMENT, AND ALL MATERS ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND ALL
RELATED AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK.  THE
PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO
HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL
CONTINUE IN FULL FORCE AND EFFECT.

       

      9.2           Integrated
Agreement: The
Note, the other Loan Documents, all related agreements, and this Agreement shall
be construed as integrated and complementary of each other, and as augmenting
and not restricting Lender’s rights and remedies.  If, after applying
the foregoing, an inconsistency still exists, the provisions of this Agreement
shall constitute an amendment thereto and shall control.

       

      9.3           Waiver: No
omission or delay by Lender in exercising any right or power under this
Agreement or any related agreements and documents will impair such right or
power or be construed to be a waiver of any Default, or Event of Default or an
acquiescence therein, and any single or partial exercise of any such right or
power will not preclude other or further exercise thereof or the exercise of any
other right, and as to Borrower no waiver will be valid unless in writing and
signed by Lender and then only to the extent specified.

       

      
        9.4           Indemnity:

         

        a.           Borrower
releases and shall indemnify, defend and hold harmless Lender and its respective
officers, employees and agents, of and from any claims, demands, liabilities,
obligations, judgments, injuries, losses, damages and costs and expenses
(including, without limitation, reasonable legal fees) resulting from (i) acts
or conduct of Borrower under, pursuant or related to this Agreement and the
other Loan Documents, (ii) Borrower’s breach or violation of any representation,
warranty, covenant or undertaking contained in this Agreement or the other Loan
Documents, (iii) Borrower’s failure to comply with any or all laws, statutes,
ordinances, governmental rules, regulations or standards, whether federal, state
or local, or court or administrative orders or decrees, (including without
limitation Environmental Laws, etc.), and (iv) any claim by any other creditor
of Borrower against Lender arising out of any transaction whether hereunder or
in any way related to the Loan Documents and all costs, expenses, fines,
penalties or other damages resulting therefrom, unless resulting solely from
acts or conduct of Lender constituting willful misconduct or gross
negligence.

         

      

      
        
          
          

           

        

        
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        b.           Promptly
after receipt by an indemnified party under subsection (a) above of notice of
the commencement of any action by a third party, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party under
such subsection, notify the indemnifying party in writing of the commencement
thereof.  The omission to so notify the indemnifying party
shall relieve the indemnifying party from any liability which it may have to any
indemnified party under such subsection only if the indemnifying party is unable
to defend such actions as a result of such failure to so notify.  In
case any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnified party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.

      

       

      9.5           Time:
Whenever Borrower shall be required to make any payment, or perform any act, on
a day which is not a Business Day, such payment may be made, or such act may be
performed, on the next succeeding Business Day.  Time is of the
essence in Borrower’s performance under all provisions of this Agreement and all
related agreements and documents.

       

      
        9.6           Expenses of
Lender: At
Closing and from time to time thereafter, Borrower will pay upon demand of
Lender all reasonable costs, fees and expenses of Lender in connection with (i)
the analysis, negotiation, preparation, execution, administration, delivery and
termination of this Agreement, and other Loan Documents and the documents and
instruments referred to herein and therein, and any amendment, amendment and
restatement, supplement, waiver or consent relating hereto or thereto, whether
or not any such amendment, amendment and restatement, supplement, waiver or
consent is executed or becomes effective, search costs, the reasonable fees,
expenses and disbursements of counsel for Lender, any fees or expenses incurred
by Lender under Section 6.6 for which Borrower is obligated thereunder, and
reasonable charges of any expert consultant to Lender, (ii) the enforcement of
Lender’s rights hereunder, or the collection of any payments owing from,
Borrower under this Agreement and/or the other Loan Documents or the protection,
preservation or defense of the rights of Lender hereunder and under the other
Loan Documents, and (iii) any refinancing or restructuring of the credit
arrangements provided under this Agreement and other Loan Documents in the
nature of a “work-out” or of any insolvency or bankruptcy proceedings, or
otherwise (including the reasonable fees and disbursements of counsel for Lender
and, with respect to clauses (ii) and (iii), reasonable allocated costs of
internal counsel) (collectively, the “Expenses”);

         

        9.7           Brokerage: This
transaction was brought about and entered into by Lender and Borrower acting as
principals and without any brokers, agents or finders being the effective
procuring cause hereof.  Borrower represents that it has not committed
Lender to the payment of any brokerage fee, commission or charge in connection
with this transaction.  If any such claim is made on Lender by any
broker, finder or agent or other person, Borrower hereby indemnifies, defends
and saves such party harmless against such claim and further will defend, with
counsel satisfactory to Lender, any action or actions to recover on such claim,
at Borrower’s own cost and expense, including such party’s reasonable
counsel fees.  Borrower further agrees that until any such claim or
demand is adjudicated in such party’s favor, the amount demanded shall be deemed
an Obligation of Borrower under this Agreement.

      

      
        
          
          

           

        

        
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9.8           Notices:

       

      a.           Any
notices or consents required or permitted by this Agreement shall be in writing
and shall be deemed given if delivered in person to the person listed below or
if sent by telecopy or by nationally recognized overnight courier, as follows,
unless such address is changed by written notice hereunder:

       

      If to
Lender
to:                                                           
 Toronto Dominion (New York) LLC

      77 King
Street West

      Toronto,
ON M5K 1A2

      Attention:
Ruth Bengo

      Telecopy
No.:  (416) 590-4335

       

      With
copies to
:                                                           TD
Securities

      31 West 52nd
Street

      New York, NY 10019

      Attention:  Director,
Credit Management

      Telecopy
No.:  (212) 827-7232

       

      TD Bank, NA

      2005
Market Street

      Philadelphia,
PA 19103

      Attention:
Credit Management

      Telecopy
No.:  (215) 282-4032

      

      Ballard Spahr Andrews &
Ingersoll, LLP

      1735
Market Street, 51st
Floor

      Philadelphia,
PA 19103

      Attention:
Steven M. Miller, Esq.

                                        Telecopy No.:  (215)
993-3970

       

      If to
Borrower
to:                                                        South
Jersey Gas Company

      1 South
Jersey Plaza

      Folsom,
NJ 08037

      Attention:
Stephen H. Clark

      Telecopy
No.:  (609) 561-8225

       

       

               With copies to
Borrower’s Counsel:            Cozen
O'Connor

                                                                 457 Haddonfield Road, Suite
300

                                               Cherry Hill, NJ
08002

      
        Attention:
Liza L. Wolf, Esq.

        Telecopy
No.:  (877) 526-3072

         

        
          b.           Any
notice sent by Lender or Borrower by any of the above methods shall be deemed to
be given when so received.

        

      

       

      
        
        

      

      
        

          
            
              
              

               

            

            
              34

              
                

              

            

            
               

            

          

      

      c.           Lender
shall be fully entitled to rely upon any telecopy transmission or other writing
purported to be sent by any Authorized Officer (whether requesting a Loan or
otherwise) as being genuine and authorized.

       

      9.9           Headings: The
headings of any paragraph or Section of this Agreement are for convenience only
and shall not be used to interpret any provision of this Agreement.

       

      9.10           Survival: All
warranties, representations, and covenants made by Borrower herein, or in any
agreement referred to herein or on any certificate, document or other instrument
delivered by it or on its behalf under this Agreement, shall be considered to
have been relied upon by Lender, and shall survive the delivery to Lender of the
Notes, regardless of any investigation made by Lender or on its
behalf.  All statements in any such certificate or other instrument
prepared and/or delivered for the benefit of Lender shall constitute warranties
and representations by Borrower hereunder.  Except as otherwise
expressly provided herein, all covenants made by Borrower hereunder or under any
other agreement or instrument shall be deemed continuing until all Obligations
are satisfied in full.  All indemnification obligations under this
Agreement, including under Section 9.4 and 9.7, shall survive the termination of
this Agreement and payment of the Obligations for a period of two (2)
years.

       

      9.11           Successors and
Assigns: This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties.  Borrower may not transfer, assign or
delegate any of its duties or obligations hereunder.  Borrower
acknowledges and agrees that Lender may at any time, and from time to time, (a)
sell participating interests in the Loans, and Lender’s rights hereunder to
other financial institutions, (b) sell, transfer, or assign the Loans and
Lender’s rights hereunder to any Bank Affiliate, and (c) sell, transfer, or
assign the Loans and Lender’s rights hereunder, to any one or more additional
banks or financial institutions, subject (as to Lender’s rights under this
clause (c)) to Borrower’s written consent, which consent shall not be
unreasonably withheld; provided that, no consent under this clause (c) shall be
required if an Event of Default exists at the time of such sale, transfer or
assignment.

       

      9.12           Duplicate
Originals: Two or
more duplicate originals of this Agreement may be signed by the parties, each of
which shall be an original but all of which together shall constitute one and
the same instrument.

       

      9.13           Modification: No
modification hereof or any agreement referred to herein shall be binding or
enforceable unless in writing and signed by Borrower and Lender.

       

      9.14           Signatories: Each
individual signatory hereto represents and warrants that he is duly authorized
to execute this Agreement on behalf of his principal and that he executes the
Agreement in such capacity and not as a party.

       

      9.15           Third
Parties: No
rights are intended to be created hereunder, or under any related agreements or
documents for the benefit of any third party donee, creditor or incidental
beneficiary of Borrower.  Nothing contained in this Agreement shall be
construed as a delegation to Lender of Borrower’s duty of performance,
including, without limitation, Borrower’s duties under any account or contract
with any other Person.

       

      
        
          
          

           

        

        
          35

          
            

          

        

        
           

        

      

      9.16           Discharge of Taxes,
Borrower’s Obligations, Etc.: Lender,
in its sole discretion, shall have the right at any time, and from time to time,
with at least ten (10) days prior notice to Borrower if Borrower fail to do so,
to: (a) pay for the performance of any of Borrower’s obligations hereunder, and
(b) discharge taxes or Liens, at any time levied or placed on Borrower’s
Property in violation of this Agreement unless Borrower is in good faith with
due diligence by appropriate proceedings contesting such taxes or Liens and
maintaining proper reserves therefor in accordance with
GAAP.  Expenses and advances shall be added to the Revolving Credit
Loans, and bear interest at the rate applicable to the Revolving Credit Loans,
until reimbursed to Lender.  Such payments and advances made by Lender
shall not be construed as a waiver by Lender of a Default or Event of Default
under this Agreement.

       

      9.17           Withholding and Other Tax
Liabilities: Lender
shall have the right to refuse to make any Loan from time to time unless
Borrower shall, at Lender’s request, have given to Lender evidence, reasonably
satisfactory to Lender, that Borrower has properly deposited or paid, as
required by law, all withholding taxes and all federal, state, city, county or
other taxes due up to and including the date of the requested
Loan.  Copies of deposit slips showing payment shall constitute
satisfactory evidence for such purpose.  In the event that any Lien,
assessment or tax liability against Borrower shall arise in favor of any taxing
authority, whether or not notice thereof shall be filed or recorded as may be
required by law, Lender shall have the right (but shall not be obligated, nor
shall Lender hereby assume the duty) to pay any such Lien, assessment or tax
liability by virtue of which such charge shall have arisen; provided, however,
that Lender shall not pay any such tax, assessment or Lien if the amount,
applicability or validity thereof is being contested in good faith and by
appropriate proceedings by Borrower.  In order to pay any such Lien,
assessment or tax liability, Lender shall not be obliged to wait until such
lien, assessment or tax liability is filed before taking such action as
hereinabove set forth.  Any sum or sums which Lender shall have paid
for the discharge of any such Lien shall be added to the Revolving Credit and
shall be paid by Borrower to Lender with interest thereon at the rate applicable
to the Revolving Credit, upon demand, and Lender shall be subrogated to all
rights of such taxing authority against Borrower.

       

      9.18           Consent to
Jurisdiction:
Borrower and Lender each hereby irrevocably consent to the non-exclusive
jurisdiction of the Courts of the State of New York or the United States
District Court for the Southern District of New York in any and all actions and
proceedings whether arising hereunder or under any other agreement or
undertaking.  Borrower waives any objection which Borrower may have
based upon lack of personal jurisdiction, improper venue or forum non
conveniens.  Borrower irrevocably agrees to service of process by
certified mail, return receipt requested to the address of the appropriate party
set forth herein.

       

      9.19           Waiver of Jury
Trial:
BORROWER AND LENDER EACH HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY
TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING WITH
RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN
DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS,
NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY PROPOSED RENEWAL,
EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR
ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.

       

      
        
          
          

           

        

        
          36

          
            

          

        

        
           

        

      

      9.20           Consequential
Damages: Neither
Lender nor agent or attorney of Lender, shall be liable for any consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.

       

      9.21           Nonliability of
Lender: The
relationship between Borrower and Lender shall be solely that of borrower and
lender.  Lender shall not have any fiduciary responsibility to
Borrower.

       

      [SIGNATURES
TO FOLLOW ON SEPARATE PAGE]

       

      
        
          
          

           

        

        
          37

          
            

          

        

        
           

        

      

      

       

      

       

      WITNESS the due execution of
this Agreement as a document under seal as of the date first written
above.

       

      SOUTH
JERSEY GAS COMPANY

      

      

      By:                                                                           

      Name:

      Title:

      

      

      TORONTO
DOMINION (NEW YORK) LLC

      

      

      By:                                                                           

      Name:

      Title:

       

       

       

      (Signature Page to Loan
Agreement)

      
        
          
          

           

        

        
          
          

          
            

          

        

        
           

        

      

      

      

       

      EXHIBIT
“A”

       

      FORM OF AUTHORIZATION
CERTIFICATE

       

      (Borrower
Letterhead)

       

      

       

      Date:
_______________

       

      Toronto
Dominion (New York)
LLC                                           TD
Securities

      77 King
Street
West                                                                     31
West 52nd
Street

      Toronto,
ON M5K
1A2                                                                 New
York, NY 10019

      Attention:
Ruth
Bengo                                                                 Attention:  Director,
Credit Management

      

      Dear
_____________:

       

      The
following individuals are authorized to request
loan advances against South Jersey Gas Company (“Borrower”) revolving credit
facility and transfer funds from any of Borrower’s accounts per written
instructions received via fax:

       

      
        
          
            
              	
                      Authorized Person

                    	
                              Title    

                    	
                              Signature

                    
	
                      1.
      ____________________

                    	
                      _____________________

                    	
                      _______________________

                    
	
                      2.
      ____________________

                    	
                      _____________________

                    	
                      _______________________

                    
	
                      3.
      ____________________

                    	
                      _____________________

                    	
                      _______________________

                    

            

          

        

      

      

       

      

       

      Acknowledged
and approved:

       

      

       

      By:                                                                

      Name:                                                                

      Title:                                                                

       

      
        
          
          

           

        

        
          A-1

          
            

          

        

        
           

        

      

      

       

      EXHIBIT
“B”

       

      FORM OF REVOLVING CREDIT
LOAN REQUEST

       

      

       

      South
Jersey Gas Company

      1 South
Jersey Plaza

      Folsom,
NJ 08037

      Attention:
Stephen H. Clark

      Telecopy
No.:  (609) 561-8225

      (“Borrower”)

       

      To:
Toronto Dominion (New York)
LLC                                   TD
Securities

      77 King
Street
West                                                                     31
West 52nd
Street

      Toronto,
ON M5K
1A2                                                                New
York, NY 10019

      Attention:
Ruth
Bengo                                                                Attention:  Director,
Credit Management

      (“Lender”)

       

      Borrower
hereby requests a Loan in the amount of $___________ pursuant to Section 2.4 of
that certain Loan Agreement by and between Borrower and Lender dated December
15_, 2008 (as amended, restated or otherwise modified from time to time, the
“Loan Agreement”).  Borrower hereby requests that such Loan be a
(select one) Base Rate Loan or LIBOR Rate Loan.  If a LIBOR Rate Loan,
the LIBOR Interest Period for such Loan is ____.  The proposed date of
the Loan is _______________.

       

      Borrower
hereby represents and warrants to Lender as follows:

       

      a.           All
conditions in Section 4.8 have been satisfied as of the date
hereof.

       

      b.           The
aggregate principal amount of all Loans outstanding under the Revolving Credit
are $_____________.

       

      c.           The
number of LIBOR Rate Loans after giving effect to this Loan are ____ (cannot
exceed 4).

       

      SOUTH
JERSEY GAS COMPANY

      

      

      By:                                                                           

      Name:                                                                           

      Date:
____________,
200__                                             Title:                                                                           

      
        
          
          

           

        

        
          B-1

          
            

          

        

        
           

        

      

      

      EXHIBIT
“C”

       

      FORM OF NOTICE OF
EXTENSION/CONVERSION

       

      Dated as
of: ______________

       

      Toronto
Dominion (New York)
LLC                                           TD
Securities

      77 King
Street
West                                                                     31
West 52nd
Street

      Toronto,
ON M5K
1A2                                                                New
York, NY 10019

      Attention:
Ruth
Bengo                                                                Attention:  Director,
Credit Management

      

       

      Ladies
and Gentlemen:

       

      This
irrevocable Notice of Conversion/Continuation (the “Notice”) is delivered to you
under Section 2.5 of the Loan Agreement dated as of December 15, 2008 (as
amended, restated or otherwise modified from time to time, the “Loan
Agreement”), by and among South Jersey Gas Company (“Borrower”) and Toronto
Dominion (New York) LLC, as lender (“Lender”).

       

      1.           This
Notice is submitted for the purpose of:

       

      (Check
one and complete applicable information in accordance with the Loan
Agreement.)

       

      o           Converting all or a portion
of a Base Rate Loan into a LIBOR Rate Loan

       

      
        	
                 

              	
                (a)

              	
                The
      aggregate outstanding principal balance of such Loan is
      $__________.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                The
      principal amount of such Loan to be converted is
    $___________.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                The
      requested effective date of the conversion of such Loan is
      _________.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                The
      requested LIBOR Interest Period applicable to the converted Loan is
      ______.

              

      

       

      o  Converting a portion of
LIBOR Rate Loan into a Base Rate Loan

       

      
        	
                 
      

              	
                (a)

              	
                The
      aggregate outstanding principal balance of such Loan is
      $__________.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                The
      last day of the current LIBOR Interest Period for such Loan is
      ___________.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                The
      principal amount of such Loan to be converted is
      $____________.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                The
      requested effective date of the conversion of such Loan is
      _________.

              

      

       

      
        
          
          

           

        

        
          C-1

          
            

          

        

        
           

        

      

      

      o   Continuing all or a portion of a LIBOR Rate Loan as a LIBOR
Rate Loan

       

      
        	
                 
      

              	
                (a)

              	
                The
      aggregate outstanding principal balance of such LIBOR Rate Loan is
      $__________.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                The
      last day of the current LIBOR Interest Period for such Loan is
      ____________.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                The
      principal amount of such LIBOR Rate Loan to be continued is
      $_____________.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                The
      requested effective date of the continuation of such LIBOR Rate Loan is
      ________.

              

      

       

      
        	
                 
      

              	
                (e)

              	
                The
      requested LIBOR Interest Period applicable to the continued LIBOR Rate
      Loan is ______.

              

      

       

      2.           All
of the conditions applicable to the conversion or continuation of the Loan
requested herein as set forth in the Loan Agreement have been satisfied or
waived as of the date hereof and will remain satisfied or waived to the date of
such Loan.

       

      3.           No
Default or Event of Default Exists

       

      4.           Capitalized
terms used herein and not defined herein shall have the meanings assigned
thereto in the Loan Agreement.

       

      IN
WITNESS WHEREOF, the undersigned, on behalf of Borrower, has executed this
Notice of Conversion/Continuation this ____ day of __________,
200__.

       

      SOUTH
JERSEY GAS COMPANY

      

      

      

      By:                                                                           

      Name:                                                                           

      Title:                                                                           

      
        
          
          

           

        

        
          C-2

          
            

          

        

        
           

        

      

      

       

      EXHIBIT
“D”

       

      QUARTERLY COMPLIANCE
CERTIFICATE

       

      _____________,
200_

       

      Toronto
Dominion (New York)
LLC                                          TD
Securities

      77 King
Street
West                                                                     31
West 52nd
Street

      Toronto,
ON M5K
1A2                                                                New
York, NY 10019

      Attention:
Ruth
Bengo                                                                Attention:  Director,
Credit Management

      

      The
undersigned Authorized Officer of South Jersey Gas Company (“Borrower”), gives
this certificate to Toronto Dominion (New York) LLC (“Lender”), in accordance
with the requirements of Section 6.13 of that certain Loan Agreement dated
December 15, 2008, by and between Borrower and Lender (“Loan
Agreement”).  Capitalized terms used in this Certificate, unless
otherwise defined herein, shall have the meanings ascribed to them in the Loan
Agreement.

       

      1.           Based
upon my review of the consolidated balance sheets and statements of income of
Borrower for the fiscal period ending __________________, 200_, copies of which
are attached hereto, I hereby certify that:

       

      
        	
                 
      

              	
                (a)

              	
                The
      ratio of Indebtedness to Consolidated Total Capitalization of Borrower and
      its Consolidated Subsidiaries is _________________;
  and

              

      

       

      
        	
                 
      

              	
                (b)

              	
                The
      Total Common Equity of Borrower is
  ___________________.

              

      

       

      Attached
as Schedule “A” are the details underlying such financial covenant
calculations.

       

      2.           No
Default exists on the date hereof, other than: ____________________ [if none, so
state]; and

       

      3.           No
Event of Default exists on the date hereof, other than: __________________ [if
none, so state].

       

      4.           Borrower
is currently in compliance with all of its obligations under the Loan Agreement
and all documents related thereto.

       

      Very
truly yours,

      

      

      By:                                                                           

      Name:                                                                           

      Title:                                                                           

      
        
          
             

          

           

        

        
          D-1exhibit10_1.htm

    
      

    

     

     

    

      877 North 8th West, Riverton, WY 
82501, Ph: (307) 856-9271, Fx: (307) 857-3050, www.usnrg.com

      

      

      For
Immediate Release

      

      

      U.S.
ENERGY CORP. ENGAGES SMH CAPITAL, INC. TO SEEK OIL AND GAS
ACQUISITIONS

      

       

      RIVERTON, Wyoming – March 4,
2009 – U.S. Energy Corp. (NASDAQ Capital Market:  “USEG”)
(“USE” or the “Company”), a natural resources exploration and development
company with interests in molybdenum, oil and gas, geothermal, and real estate
assets, today announced that it has engaged Houston, Texas-based SMH Capital
Inc. to act as a financial advisor in connection with the potential purchase or
acquisition of oil and gas assets.

       

       

      “With
overall continued market uncertainty and commodity prices remaining depressed we
believe now is the ideal time to enhance our acquisition strategy by working
closely with SMH to seek out high quality oil and gas assets,” stated Mark
Larsen, President of U.S. Energy Corp.  “It is our goal to reach a
production rate of 7000 MCFE/D by year end although we are not limiting our
corporate objectives in this endeavor.  By leveraging SMH’s contacts
and expertise, we intend to use our solid balance sheet to selectively and
efficiently access what we believe is a growing pool of attractively valued
exploration and production stage oil and gas assets,” he added.

       

      * * * *
*

      
        
           

        

        
           

          
            

          

        

        
           

          
            Press
Release

            March 4,
2009

            Page  of
2 of 2

            

          

        

      

      About
SMH Capital Inc.

      

      SMH
Capital Investment Banking (www.smhib.com) is a full-service investment bank
providing middle-market companies with private placements and public offerings
of equity and debt securities, as well as financial-advisory services in
connection with mergers and acquisitions, restructuring and
recapitalizations.

      

      SMH
Capital is a registered broker-dealer and an affiliate of Sanders Morris Harris
Group (NASDAQ:SMHG) (member FINRA/SIPC).

      

      About
U.S. Energy Corp.

      

      U.S.
Energy Corp. is a diversified natural resource company with interests in
molybdenum, oil and gas, geothermal and real estate assets.  The
Company is headquartered in Riverton, Wyoming, and its common stock is listed on
The NASDAQ Capital Market under the symbol “USEG”.

       

      Note
Regarding Mcfe

       

      In this
press release, Mcfes are derived by converting oil to gas in the ratio of one
barrel of oil to six thousand cubic feet of gas (1 bbl:6 Mcf). One thousand
cubic feet of gas equivalent ("Mcfe") amounts may be misleading, particularly if
used in isolation.  A Mcfe conversion ratio of 1 bbl of oil to 6 Mcf
of natural gas is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value of equivalency at
the well head.

      

      * * * *
*

      

      Disclosure
Regarding Mineral Resources Under SEC and Canadian Regulations; and
Forward-Looking Statements

      

      The
Company owns or may come to own stock in companies which are traded on foreign
exchanges, and may have agreements with some of these companies to acquire
and/or develop the Company’s mineral properties.  An example is Sutter
Gold Mining Inc.  These other companies are subject to the reporting
requirements of other jurisdictions.

      

      United
States residents are cautioned that some of the information available about our
mineral properties, which is reported by the other companies in foreign
jurisdictions, may be materially different from what the Company is permitted to
disclose in the United States.

      

      This
news release includes statements which may constitute “forward-looking”
statements, usually containing the words “believe,” “estimate,” “project,”
“expect," or similar expressions.  These statements are made pursuant
to the safe harbor provision of the Private Securities Litigation Reform Act of
1995.  Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements.  Factors that would cause or contribute to
such differences include, but are not limited to, future trends in mineral
prices, the availability of capital, competitive factors, and other
risks.  By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revision or changes
after the date of this release.

      

      For
further information on the differences between the reporting limitations of the
United States, compared to reports filed in foreign jurisdictions, and also
concerning forward-looking statements, please see the Company’s Form 10-K
(“Disclosure Regarding Forward-Looking Statements”; “Disclosure Regarding
Mineral Resources under SEC and Canadian Regulation”; and “Risk Factors”); and
similar disclosures in the Company’s Forms 10-Q.

      

      *
* * *.*

      

      For
further information, please contact:

      

      Reggie
Larsen

      Director
of Investor Relations

      U.S.
Energy Corp.

      1 800 776
9271

      Reggie@usnrg.com

      

      Nick
Hurst

      The
Equicom Group

      Investor
Relations

      403 538
4845

      nhurst@equicomgroup.com

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