CREDIT AGREEMENT

Loan Agreement

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This Loan Agreement involves

NEW JERSEY RESOURCES CORP | NEW JERSEY NATURAL GAS COMPANY | THE BANKS PARTY HERETO | PNC BANK, NATIONAL ASSOCIATION, | JPMORGAN CHASE BANK NA | BANK OF TOKYO-MITSUBISHI TRUST COMPANY | CITICORP NORTH AMERICA, INC | PNC CAPITAL MARKETS, INC

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Title: CREDIT AGREEMENT
Governing Law: New Jersey Date: 2/7/2005
Industry: Natural Gas Utilities Sector: Utilities

CREDIT AGREEMENT, Parties: new jersey resources corp , new jersey natural gas company , the banks party hereto , pnc bank national association , jpmorgan chase bank na , bank of tokyo-mitsubishi trust company , citicorp north america inc , pnc capital markets inc

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Exhibit 4-2

$225,000,000 REVOLVING CREDIT FACILITY

CREDIT AGREEMENT

BY AND AMONG

NEW JERSEY NATURAL GAS COMPANY

AND

THE BANKS PARTY HERETO

AND

PNC BANK, NATIONAL ASSOCIATION,

AS ADMINISTRATIVE AGENT

AND

JPMORGAN CHASE BANK NA AND

FLEET NATIONAL BANK,

AS SYNDICATION AGENTS

AND

BANK OF TOKYO-MITSUBISHI TRUST COMPANY AND

CITICORP NORTH AMERICA, INC.,

AS DOCUMENTATION AGENTS

AND

PNC CAPITAL MARKETS, INC.,

AS LEAD ARRANGER

DATED AS OF DECEMBER 16, 2004

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TABLE OF CONTENTS

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1. CERTAIN DEFINITIONS................................................................................................ 1

1.1 Certain Definitions..................................................................................... 1

1.2 Construction............................................................................................ 22

1.2.1. Number; Inclusion................................................................................ 22

1.2.2. Determination.................................................................................... 22

1.2.3. Agent's Discretion and Consent................................................................... 22

1.2.4. Documents Taken as a Whole....................................................................... 22

1.2.5. Headings......................................................................................... 22

1.2.6. Implied References to this Agreement............................................................. 23

1.2.7. Persons.......................................................................................... 23

1.2.8. Modifications to Documents....................................................................... 23

1.2.9. From, To and Through............................................................................. 23

1.2.10.Shall; Will...................................................................................... 23

1.3 Accounting Principles................................................................................... 23

2. REVOLVING CREDIT AND SWING LOAN FACILITIES......................................................................... 24

2.1 Commitments............................................................................................. 24

2.1.1. Revolving Credit Loans........................................................................... 24

2.1.2. Swing Loan Commitment............................................................................ 24

2.2 Nature of Banks' Obligations with Respect to Revolving Credit Loans..................................... 24

2.3 Certain Fees............................................................................................ 25

2.4 Revolving Credit Loan Requests.......................................................................... 25

2.5 Swing Loan Requests..................................................................................... 26

2.6 Making Revolving Credit Loans and Swing Loans........................................................... 26

2.6.1. Making Revolving Credit Loans.................................................................... 26

2.6.2. Making Swing Loans............................................................................... 27

2.7 Swing Loan Note......................................................................................... 27

2.8 Use of Proceeds......................................................................................... 27

2.9 Letter of Credit Subfacility............................................................................ 27

2.9.1. Issuance of Letters of Credit.................................................................... 27

2.9.2. Letter of Credit Fees............................................................................ 28

2.9.3. Disbursements, Reimbursement..................................................................... 28

2.9.4. Repayment of Participation Advances.............................................................. 29

2.9.5. Documentation.................................................................................... 30

2.9.6. Determinations to Honor Drawing Requests......................................................... 30

2.9.7. Nature of Participation and Reimbursement Obligations............................................ 30

2.9.8. Indemnity........................................................................................ 32

2.9.9. Liability for Acts and Omissions................................................................. 32

2.10 Borrowings to Repay Swing Loans......................................................................... 34

2.11 Right to Increase Commitments........................................................................... 34

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3. INTENTIONALLY OMITTED.............................................................................................. 35

4. INTEREST RATES..................................................................................................... 35

4.1 Interest Rate Options................................................................................... 35

4.1.1. Revolving Credit Interest Rate Options........................................................... 35

4.1.2. Rate Quotations.................................................................................. 35

4.1.3. Change in Fees or Interest Rates................................................................. 36

4.2 Interest Periods........................................................................................ 36

4.2.1. Amount of Borrowing Tranche...................................................................... 36

4.2.2. Renewals......................................................................................... 36

4.3 Interest After Default.................................................................................. 37

4.3.1. Letter of Credit Fees, Interest Rate............................................................. 37

4.3.2. Other Obligations........F....................................................................... 37

4.3.3. Acknowledgment................................................................................... 37

4.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available.......................... 37

4.4.1. Unascertainable.................................................................................. 37

4.4.2. Illegality; Increased Costs; Deposits Not Available.............................................. 38

4.4.3. Agent's and Bank's Rights........................................................................ 38

4.5 Selection of Interest Rate Options...................................................................... 39

5. PAYMENTS........................................................................................................... 39

5.1 Payments................................................................................................ 39

5.2 Pro Rata Treatment of Banks............................................................................. 39

5.3 Interest Payment Dates.................................................................................. 40

F5.4 Prepayments............................................................................................ 40

5.4.1. Voluntary Prepayments............................................................................ 40

5.4.2. Replacement of a Bank............................................................................ 41

5.4.3. Change of Lending Office......................................................................... 42

5.5 Voluntary Commitment Reductions......................................................................... 42

5.6 Additional Compensation in Certain Circumstances........................................................ 42

5.6.1. Increased Costs or Reduced Return Resulting From Taxes, Reserves,

Capital Adequacy Requirements, Expenses, Etc..................................................... 42

5.6.2. Indemnity........................................................................................ 43

5.7 Interbank Market Presumption............................................................................ 44

5.8 Taxes................................................................................................... 44

5.8.1. No Deductions.................................................................................... 44

5.8.2. Stamp Taxes...................................................................................... 44

5.8.3. Indemnification for Taxes Paid by a Bank......................................................... 45

5.8.4. Certificate...................................................................................... 45

5.8.5. Survival......................................................................................... 45

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5.9 Notes.................................................................................................. 45

5.10 Settlement Date Procedures.............................................................................. 45

6. REPRESENTATIONS AND WARRANTIES..................................................................................... 46

6.1 Representations and Warranties.......................................................................... 46

6.1.1. Organization and Qualification................................................................... 46

6.1.2. Subsidiaries..................................................................................... 46

6.1.3. Power and Authority.............................................................................. 47

6.1.4. Validity and Binding Effect...................................................................... 47

6.1.5. No Conflict...................................................................................... 47

6.1.6. Litigation....................................................................................... 47

6.1.7. Title to Properties.............................................................................. 48

6.1.8. Financial Statements............................................................................. 48

6.1.9. Use of Proceeds; Margin Stock; Section 20 Subsidiaries........................................... 48

6.1.10.Full Disclosure.................................................................................. 49

6.1.11.Taxes............................................................................................ 49

6.1.12.Consents and Approvals........................................................................... 49

6.1.13.No Event of Default; Compliance With Instruments................................................. 50

6.1.14.Patents, Trademarks, Copyrights, Licenses, Etc................................................... 50

6.1.15.Insurance........................................................................................ 50

6.1.16.Compliance With Laws............................................................................. 50

6.1.17.Material Contracts; Burdensome Restrictions...................................................... 51

6.1.18.Investment Companies; Regulated Entities......................................................... 51

6.1.19.Plans and Benefit Arrangements................................................................... 51

6.1.20.Employment Matters............................................................................... 52

6.1.21.Environmental Matters............................................................................ 52

6.1.22.Senior Debt Status............................................................................... 53

6.1.23.Hedging Contract Policies........................................................................ 53

6.1.24.Permitted Related Business Opportunities......................................................... 53

6.1.25.Anti-Terrorism Laws; Executive Order No. 13224................................................... 53

6.2 Continuation of Representations......................................................................... 54

7. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT............................................................ 54

7.1 First Loans and Letters of Credit....................................................................... 54

7.1.1. Officer's Certificate............................................................................ 54

7.1.2. Secretary's Certificate.......................................................................... 54

7.1.3. Opinion of Counsel............................................................................... 55

7.1.4. Legal Details.................................................................................... 55

7.1.5. Payment of Fees.................................................................................. 55

7.1.6. Consents......................................................................................... 56

7.1.7. Officer's Certificate Regarding MACs............................................................. 56

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7.1.8. No Violation of Laws............................................................................. 56

7.1.9. No Actions or Proceedings........................................................................ 56

7.1.10. Hedging Contract Policies....................................................................... 56

7.1.11. Termination of Commitments and Repayment of Outstanding Indebtedness............................ 56

7.2 Each Additional Loan or Letter of Credit................................................................ 56

8. COVENANTS.......................................................................................................... 57

8.1 Affirmative Covenants................................................................................... 57

8.1.1. Preservation of Existence, Etc................................................................... 57

8.1.2. Payment of Liabilities, Including Taxes, Etc..................................................... 57

8.1.3. Maintenance of Insurance......................................................................... 58

8.1.4. Maintenance of Properties and Leases............................................................. 58

8.1.5. Maintenance of Patents, Trademarks, Etc.......................................................... 58

8.1.6. Visitation Rights................................................................................ 58

8.1.7. Keeping of Records and Books of Account.......................................................... 59

8.1.8. Plans and Benefit Arrangements................................................................... 59

8.1.9. Compliance With Laws............................................................................. 59

8.1.10. Use of Proceeds................................................................................. 59

8.1.11. Hedging Contract Policies....................................................................... 60

8.2 Negative Covenants...................................................................................... 60

8.2.1. Indebtedness..................................................................................... 60

8.2.2. Liens............................................................................................ 61

8.2.3. Guaranties....................................................................................... 62

8.2.4. Loans and Investments............................................................................ 62

8.2.5. Liquidations, Mergers, Consolidations, Acquisitions.............................................. 63

8.2.6. Dispositions of Assets or Subsidiaries........................................................... 64

8.2.7. Affiliate Transactions........................................................................... 64

8.2.8. Subsidiaries, Partnerships and Joint Ventures.................................................... 65

8.2.9. Continuation of or Change in Business............................................................ 65

8.2.10.Plans and Benefit Arrangements................................................................... 65

8.2.11. Fiscal Year..................................................................................... 65

8.2.12. Maximum Leverage Ratio.......................................................................... 66

8.2.13. Minimum Interest Coverage Ratio................................................................. 66

8.2.14. No Limitation on Dividends and Distributions by Borrower or its Subsidiaries.................... 66

8.2.15. Payment of Dividends; Redemptions............................................................... 66

8.2.16. No Modification of Hedging Contract Policies.................................................... 66

8.2.17. Off-Balance Sheet Financing..................................................................... 67

8.2.18. Amendments to NJNG Note Agreement............................................................... 67

8.2.19. No Violation of Anti-Terrorism Laws............................................................. 67

8.3 Reporting Requirements.................................................................................. 68

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8.3.1. Quarterly Financial Statements................................................................... 68

8.3.2. Annual Financial Statements...................................................................... 68

8.3.3. Certificate of the Borrower...................................................................... 69

8.3.4. Notice of Default................................................................................ 69

8.3.5. Notice of Litigation............................................................................. 69

8.3.6. Notice of Change in Debt Rating.................................................................. 70

8.3.7. Sale of Assets................................................................................... 70

8.3.8. Budgets, Forecasts, Other Reports and Information................................................ 70

8.3.9. Notices Regarding Plans and Benefit Arrangements................................................. 70

9. DEFAULT............................................................................................................ 72

9.1 Events of Default....................................................................................... 72

9.1.1. Payments Under Loan Documents.................................................................... 72

9.1.2. Breach of Warranty............................................................................... 72

9.1.3. Breach of Negative Covenants or Visitation Rights................................................ 72

9.1.4. Breach of Other Covenants........................................................................ 72

9.1.5. Defaults in Other Agreements or Indebtedness..................................................... 73

9.1.6. Final Judgments or Orders........................................................................ 73

9.1.7. Loan Document Unenforceable...................................................................... 73

9.1.8. Uninsured Losses; Proceedings Against Assets..................................................... 74

9.1.9. Notice of Lien or Assessment..................................................................... 74

9.1.10. Insolvency...................................................................................... 74

9.1.11. Events Relating to Plans and Benefit Arrangements............................................... 74

9.1.12. Cessation of Business........................................................................... 75

9.1.13. Change of Control............................................................................... 75

9.1.14. Involuntary Proceedings......................................................................... 75

9.1.15. Voluntary Proceedings........................................................................... 75

9.2 Consequences of Event of Default........................................................................ 76

9.2.1. Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings................ 76

9.2.2. Bankruptcy, Insolvency or Reorganization Proceedings............................................. 76

9.2.3. Set-off.......................................................................................... 77

9.2.4. Suits, Actions, Proceedings...................................................................... 77

9.2.5. Application of Proceeds; Collateral Sharing...................................................... 77

9.2.6. Other Rights and Remedies........................................................................ 78

10. THE AGENT......................................................................................................... 78

10.1 Appointment............................................................................................. 78

10.2 Delegation of Duties.................................................................................... 79

10.3 Nature of Duties; Independent Credit Investigation...................................................... 79

10.4 Actions in Discretion of Agent; Instructions From the Banks............................................. 80

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10.5 Reimbursement and Indemnification of Agent by the Borrower.................................................. 80

10.6 Exculpatory Provisions; Limitation of Liability............................................................. 81

10.7 Reimbursement and Indemnification of Agent by Banks......................................................... 81

10.8 Reliance by Agent........................................................................................... 82

10.9 Notice of Default........................................................................................... 82

10.10 Notices..................................................................................................... 82

10.11 Banks in Their Individual Capacities; Agents in Its Individual Capacity..................................... 83

10.12 Holders of Notes............................................................................................ 83

10.13 Equalization of Banks....................................................................................... 83

10.14 Successor Agent............................................................................................. 84

10.15 Agent's Fee................................................................................................. 84

10.16 Availability of Funds....................................................................................... 84

10.17 Calculations................................................................................................ 85

10.18 Beneficiaries............................................................................................... 85

10.19 No Reliance on Agent's Customer Identification Program...................................................... 85

11. MISCELLANEOUS..................................................................................................... 86

11.1 Modifications, Amendments or Waivers........................................................................ 86

11.1.1. Increase of Revolving Credit Commitments; Extension of Expiration Date.............................. 86

11.1.2. Release of Collateral or Guarantor.................................................................. 86

11.1.3. Miscellaneous....................................................................................... 87

11.2 No Implied Waivers; Cumulative Remedies; Writing Required................................................... 87

11.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes........................................... 87

11.4 Holidays.................................................................................................... 88

11.5 Funding by Branch, Subsidiary or Affiliate.................................................................. 89

11.5.1. Notional Funding.................................................................................... 89

11.5.2. Actual Funding...................................................................................... 89

11.6 Notices; Lending Offices.................................................................................... 89

11.7 Severability................................................................................................ 90

11.8 Governing Law............................................................................................... 90

11.9 Prior Understanding......................................................................................... 91

11.10 Duration; Survival.......................................................................................... 91

11.11 Successors and Assigns; Joinder of a Bank................................................................... 91

11.12 Confidentiality............................................................................................. 93

11.12.1. General............................................................................................ 93

11.12.2. Sharing Information With Affiliates of the Banks................................................... 93

11.13 Counterparts................................................................................................ 93

11.14 Agent's or Bank's Consent................................................................................... 94

11.15 Exceptions.................................................................................................. 94

11.16 WAIVER OF JURY TRIAL........................................................................................ 94

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11.17 JURISDICTION & VENUE......................................................................................... 94

11.18 Certifications From Banks and Participants................................................................... 95

11.18.1. Tax Withholding..................................................................................... 95

11.18.2. USA Patriot Act..................................................................................... 96

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LIST OF SCHEDULES AND EXHIBITS

SCHEDULES

SCHEDULE 1.1(A) - PRICING GRID

SCHEDULE 1.1(B) - COMMITMENTS OF BANKS AND ADDRESSES FOR

NOTICES

SCHEDULE 1.1(P) - PERMITTED LIENS

SCHEDULE 2.9.1 - EXISTING LETTERS OF CREDIT

SCHEDULE 6.1.2 - SUBSIDIARIES

SCHEDULE 6.1.12 - CONSENTS AND APPROVALS

SCHEDULE 6.1.23 - HEDGING CONTRACT POLICIES

SCHEDULE 6.1.24 PERMITTED BUSINESS OPPORTUNITIES

SCHEDULE 8.2.1 - EXISTING INDEBTEDNESS

EXHIBITS

EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT

EXHIBIT 1.1(B) - BANK JOINDER

EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE

EXHIBIT 1.1(S) - SWING LOAN NOTE

EXHIBIT 2.4 - LOAN REQUEST

EXHIBIT 2.5 - SWING LOAN REQUEST

EXHIBIT 5.5 - COMMITMENT REDUCTION NOTICE

EXHIBIT 7.1.3(A) - OPINION OF COUNSEL

EXHIBIT 7.1.3(B) - OPINION OF IN-HOUSE COUNSEL

EXHIBIT 8.2.5 - ACQUISITION COMPLIANCE CERTIFICATE

EXHIBIT 8.3.3 - COMPLIANCE CERTIFICATE

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT is dated as of December 16, 2004 and is made by and

among NEW JERSEY NATURAL GAS COMPANY, a New Jersey corporation (the "Borrower"),

the BANKS (as hereinafter defined), JPMORGAN CHASE BANK NA and FLEET NATIONAL

BANK, each in its capacity as a syndication agent, BANK OF TOKYO-MITSUBISHI

TRUST COMPANY and CITICORP NORTH AMERICA, INC., each in its capacity as a

documentation agent, and PNC BANK, NATIONAL ASSOCIATION, in its capacity as

administrative agent for the Banks under this Agreement (hereinafter referred to

in such capacity as the "Agent").

WITNESSETH:

WHEREAS, the Borrower has requested the Banks to provide a revolving

credit facility to the Borrower in an aggregate principal amount not to exceed

$225,000,000; and

WHEREAS, the revolving credit facility shall be used for refinancing

existing indebtedness and general corporate purposes of the Borrower; and

WHEREAS, the Banks are willing to provide such credit upon the terms and

conditions hereinafter set forth;

NOW, THEREFORE, the parties hereto, in consideration of their mutual

covenants and agreements hereinafter set forth and intending to be legally bound

hereby, covenant and agree as follows:

1. CERTAIN DEFINITIONS

1.1 Certain Definitions.

In addition to words and terms defined elsewhere in this Agreement,

the following words and terms shall have the following meanings, respectively,

unless the context hereof clearly requires otherwise:

Acquired Person shall mean a Person or business acquired by

the Borrower or any Subsidiary of the Borrower in a transaction which is a

Permitted Acquisition.

Acquisition Compliance Certificate shall have the meaning

assigned to that term in Section 8.2.5.

Additional Bank shall have the meaning assigned to that term

in Section 11.11(iv).

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Affiliate as to any Person shall mean any other Person (i)

which directly or indirectly controls, is controlled by, or is under common

control with such Person, (ii) which beneficially owns or holds 10% or more of

any class of the voting or other equity interests of such Person, or (iii) 10%

or more of any class of voting interests or other equity interests of which is

beneficially owned or held, directly or indirectly, by such Person. Control, as

used in this definition, shall mean the possession, directly or indirectly, of

the power to direct or cause the direction of the management or policies of a

Person, whether through the ownership of voting securities, by contract or

otherwise, including the power to elect a majority of the directors or trustees

of a corporation or trust, as the case may be.

Agent shall mean PNC Bank, National Association, and its

successors and assigns.

Agent's Fee shall have the meaning assigned to that term in

Section 10.15.

Agent's Letter shall have the meaning assigned to that term in

Section 10.15.

Agreement shall mean this Credit Agreement, as the same may be

supplemented or amended from time to time, including all schedules and exhibits.

Anti-Terrorism Laws shall mean any Laws relating to terrorism

or money laundering, including Executive Order No. 13224, the USA Patriot Act,

the Laws comprising or implementing the Bank Secrecy Act, and the Laws

administered by the United States Treasury Department's Office of Foreign Asset

Control (as any of the foregoing Laws may from time to time be amended, renewed,

extended, or replaced).

Applicable Facility Fee Rate shall mean the percentage rate

per annum at the indicated level of Debt Rating in the pricing grid on Schedule

1.1(A) below the heading "Facility Fee." The Applicable Facility Fee Rate shall

be computed in accordance with the parameters set forth on Schedule 1.1(A).

Applicable Letter of Credit Fee Rate shall mean the percentage

rate per annum at the indicated level of Debt Rating in the pricing grid on

Schedule 1.1(A) below the heading "Letter of Credit Fee." The Applicable Letter

of Credit Fee Rate shall be computed in accordance with the parameters set forth

on Schedule 1.1(A).

Applicable Margin shall mean, as applicable:

(A) the percentage spread to be added to Base Rate under the

Base Rate Option at the indicated level of Debt Rating in the pricing grid on

Schedule 1.1(A) below the heading "Base Rate Spread," or

(B) the percentage spread to be added to Euro-Rate under the

Euro-Rate Option at the indicated level of Debt Rating in the pricing grid on

Schedule 1.1(A) below the heading "Euro-Rate Spread."

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The Applicable Margin shall be computed in accordance with the

parameters set forth on Schedule 1.1(A).

Approved Fund shall mean, with respect to any Bank, any Person

(other than a natural person) that is engaged in making, purchasing, holding or

investing in bank loans and similar extensions of credit in the ordinary course

of its business and that is administered by such Bank, an Affiliate of such Bank

or an entity or an Affiliate of an entity that administers or manages such Bank.

Assignment and Assumption Agreement shall mean an Assignment

and Assumption Agreement by and among a Purchasing Bank, a Transferor Bank and

the Agent, as Agent and on behalf of the remaining Banks, substantially in the

form of Exhibit 1.1(A).

Authorized Officer shall mean those individuals, designated by

written notice to the Agent from the Borrower, authorized to execute notices,

reports and other documents on behalf of the Borrower required hereunder. The

Borrower may amend such list of individuals from time to time by giving written

notice of such amendment to the Agent.

Bank Joinder shall mean a Bank Joinder substantially in the

form of Exhibit 1.1(B).

Bank Provided Interest Rate Hedge shall mean an Interest Rate

Hedge which is provided by any Bank and that meets the following requirements:

such Interest Rate Hedge (i) is documented in a standard International Swap

Dealer Association Agreement, (ii) provides for the method of calculating the

reimbursable amount of the provider's credit exposure in a reasonable and

customary manner, and (iii) is entered into for hedging (rather than

speculative) purposes. The liabilities of the Borrower to the provider of any

Bank-Provided Interest Rate Hedge shall be "Obligations" hereunder and otherwise

treated as Obligations for the purposes of each of the other Loan Documents.

Banks shall mean the financial institutions named on Schedule

1.1(B) and their respective successors and assigns as permitted hereunder, each

of which is referred to herein as a Bank.

Base Rate shall mean the greater of (i) the interest rate per

annum announced from time to time by the Agent at its Principal Office as its

then prime rate, which rate may not be the lowest rate then being charged

commercial borrowers by the Agent, or (ii) the Federal Funds Open Rate plus 1/2%

per annum.

Base Rate Option shall mean the option of the Borrower to have

Revolving Credit Loans bear interest at the rate and under the terms and

conditions set forth in Section 4.1.1(i).

Benefit Arrangement shall mean at any time an "employee

benefit plan," within the meaning of Section 3(3) of ERISA, which is neither a

Plan nor a Multiemployer Plan

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and which is maintained, sponsored or otherwise contributed to by any member of

the ERISA Group.

Blocked Person shall have the meaning assigned to such term in

Subsection 6.1.25.

Borrower shall mean New Jersey Natural Gas Company, a

corporation organized and existing under the laws of the State of New Jersey.

Borrowing Date shall mean, with respect to any Loan, the date

for the making thereof or the renewal or conversion thereof at or to the same or

a different Interest Rate Option, which shall be a Business Day.

Borrowing Tranche shall mean specified portions of Loans

outstanding as follows: (i) any Loans to which a Euro-Rate Option applies which

become subject to the same Interest Rate Option under the same Loan Request by

the Borrower and which have the same Interest Period shall constitute one

Borrowing Tranche, and (ii) all Loans to which a Base Rate Option applies shall

constitute one Borrowing Tranche.

Business Day shall mean any day other than a Saturday or

Sunday or a legal holiday on which commercial banks are authorized or required

to be closed for business in Pittsburgh, Pennsylvania and if the applicable

Business Day relates to any Loan to which the Euro-Rate Option applies, such day

must also be a day on which dealings are carried on in the London interbank

market.

Closing Date shall mean the Business Day on which the first

Loan shall be made, which shall be December 16, 2004. The closing shall take

place on the Closing Date at such time and place as the parties agree.

Commercial Letter of Credit shall mean any letter of credit

which is issued in respect of the purchase of goods or services by the Borrower

in the ordinary course of its business.

Commitment shall mean as to any Bank its Revolving Credit

Commitment and, in the case of the Agent, its Swing Loan Commitment, and

Commitments shall mean the aggregate of the Revolving Credit Commitments and

Swing Loan Commitment of all of the Banks.

Compliance Certificate shall have the meaning assigned to such

term in Section 8.3.3.

Consideration shall mean with respect to any Permitted

Acquisition, the aggregate of (i) the cash paid by the Borrower,

directly or indirectly, to the seller in connection therewith, (ii) the

Indebtedness incurred or assumed by the Borrower, whether in favor of the seller

or otherwise and whether fixed or contingent, (iii) any Guaranty given or

incurred by the

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Borrower in connection therewith, and (iv) any other consideration given or

obligation incurred by the Borrower in connection therewith.

Consolidated Income from Operations for any period of

determination shall mean (i) the sum of net income (provided that there shall be

excluded from net income: (a) any extraordinary items of gain or loss

(including, without limitation, those items created by mandated changes in

accounting treatment), and (b) any gain or loss of any Person accounted for on

the equity method except to the extent of cash distributions received by the

Borrower or any Subsidiary of the Borrower during the period of determination

with respect to any gain of any Person accounted for on the equity method),

depreciation, amortization, other non-cash charges to net income, interest

expense and income tax expense minus (ii) non-cash credits to net income, in

each case of the Borrower and its Subsidiaries for such period determined and

consolidated in accordance with GAAP.

Consolidated Interest Expense for any period of determination

shall mean interest expense for such period of the

Borrower and its Subsidiaries determined on a consolidated basis in accordance

with GAAP.

Consolidated Shareholders' Equity shall mean as of any date of

determination the sum of the amounts under the headings "Common Shareholders'

Equity" and "Preferred Shareholders' Equity" on the balance sheet, prepared in

accordance with GAAP, for the Borrower and its Subsidiaries on a consolidated

basis as of such date of determination.

Consolidated Total Capitalization shall mean as of any date of

determination the sum of (i) Consolidated Total Indebtedness, plus (ii)

Consolidated Shareholders' Equity.

Consolidated Total Indebtedness shall mean as of any date of

determination total Indebtedness, without duplication, of the Borrower and its

Subsidiaries.

Contamination shall mean the presence or release or threat of

release of Regulated Substances in, on, under or emanating to or from the

Property, which pursuant to Environmental Laws requires notification or

reporting to an Official Body, or which pursuant to Environmental Laws requires

the performance of a Remedial Action or which otherwise constitutes a violation

of Environmental Laws.

Debt Rating shall mean the rating of the Borrower's senior

secured long-term debt by each of Standard & Poor's and Moody's.

Dollar, Dollars, U.S. Dollars and the symbol $ shall mean

lawful money of the United States of America.

Drawing Date shall have the meaning assigned to that term in

Section 2.9.3.2.

<PAGE>

Environmental Complaint shall mean any (i) notice of

non-compliance or violation, citation or order relating in any way to any

Environmental Law, Environmental Permit, Contamination or Regulated Substance;

(ii) civil, criminal, administrative or regulatory investigation instituted by

an Official Body relating in any way to any Environmental Law, Environmental

Permit, Contamination or Regulated Substance; (iii) administrative, regulatory

or judicial action, suit, claim or proceeding instituted by any Person or

Official Body or any other written notice of liability or potential liability

from any Person or Official Body, in either instance, relating to or setting

forth allegations or a cause of action for personal injury (including but not

limited to death), property damage, natural resource damage, contribution or

indemnity for the costs associated with the performance of Remedial Actions,

direct recovery for the costs associated with the performance of Remedial

Actions, liens or encumbrances attached to or recorded or levied against

property for the costs associated with the performance of Remedial Actions,

civil or administrative penalties, criminal fines or penalties or declaratory or

equitable relief arising under any Environmental Laws; or (iv) subpoena, request

for information or other written notice or demand of any type issued by an

Official Body pursuant to any Environmental Laws.

Environmental Laws shall mean all federal, state, local and

foreign Laws (including, but not limited to, the Comprehensive Environmental

Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., the

Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the

Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., the

Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Federal Water

Pollution Control Act, 33 U.S.C. Sections 1251 et seq., the Federal Safe

Drinking Water Act, 42 U.S.C. Sections 300f-300j, the Federal Air Pollution

Control Act, 42 U.S.C. Section 7401 et seq., the Oil Pollution Act, 33 U.S.C.

Section 2701 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7

U.S.C. Sections 136 to 136y, the Occupational Safety and Health Act, 29 U.S.C.

Section 651 et seq., each as amended, and any regulations promulgated or any

equivalent state or local Law, and any amendments thereto) and any consent

decrees, consent orders, consent agreements, settlement agreements, judgments,

orders, directives, policies or programs issued by or entered into with an

Official Body pertaining or relating to: (i) pollution or pollution control;

(ii) protection of human health from exposure to Regulated Substances; (iii)

protection of the environment and/or natural resources; (iv) protection of

employee safety in the workplace and protection of employees from exposure to

Regulated Substances in the workplace (but excluding workers compensation and

wage and hour Laws); (v) the presence, use, management, generation, manufacture,

processing, extraction, treatment, recycling, refining, reclamation, labeling,

sale, transport, storage, collection, distribution, disposal or release or

threat of release of Regulated Substances; (vi) the presence of Contamination;

(vii) the protection of endangered or threatened species; and (viii) the

protection of Environmentally Sensitive Areas.

Environmental Permits shall mean all permits, licenses, bonds

or other forms of financial assurances, consents, registrations, identification

numbers, approvals or authorizations required under Environmental Laws (i) to

own, occupy or maintain the Property; (ii) for the operations and business

activities of the Borrower and any of its Subsidiaries; or (iii) for the

performance of a Remedial Action.

<PAGE>

Environmental Records shall mean all notices, reports,

records, plans, applications, forms or other filings relating or pertaining to

the Property, Contamination, the performance of a Remedial Action and the

operations and business activities of the Borrower and any of its Subsidiaries

which pursuant to Environmental Laws, Environmental Permits or at the request or

direction of an Official Body either must be submitted to an Official Body or

which otherwise must be maintained.

Environmentally Sensitive Area shall mean (i) any wetland as

defined by applicable Environmental Laws; (ii) any area designated as a coastal

zone pursuant to applicable Laws, including Environmental Laws; (iii) any area

of historic or archeological significance or scenic area as defined or

designated by applicable Laws, including Environmental Laws; (iv) habitats of

endangered species or threatened species as designated by applicable Laws,

including Environmental Laws; or (v) a floodplain or other flood hazard area as

defined pursuant to any applicable Laws.

ERISA shall mean the Employee Retirement Income Security Act

of 1974, as the same may be amended or supplemented from time to time, and any

successor statute of similar import, and the rules and regulations thereunder,

as from time to time in effect.

ERISA Group shall mean, at any time, the Borrower and all

members of a controlled group of corporations and all trades or businesses

(whether or not incorporated) under common control and all other entities which,

together with the Borrower, are treated as a single employer under Section 414

of the Internal Revenue Code.

Euro-Rate shall mean, with respect to the Loans comprising any

Borrowing Tranche to which the Euro-Rate Option applies for any Interest Period,

the interest rate per annum determined by the Agent by dividing (the resulting

quotient rounded upwards, if necessary to the nearest 1/100th of 1% per annum)

(i) the rate of interest determined by the Agent in accordance with its usual

procedures (which determination shall be conclusive, absent manifest error) to

be the average of the London interbank offered rates for U.S. Dollars quoted by

the British Bankers' Association as set forth on Moneyline Telerate (or

appropriate successor or, if the British Bankers' Association or its successor

ceases to provide such quotes, a comparable replacement determined by the Agent)

display page 3750 (or such other display page on the Moneyline Telerate service

as may replace display page 3750), two (2) Business Days prior to the first day

of such Interest Period for an amount comparable to such Borrowing Tranche and

having a Borrowing Date and a maturity comparable to such Interest Period by

(ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The

Euro-Rate may also be expressed by the following formula:

<PAGE>

Average of London interbank offered rates quoted

by BBA or appropriate successor as shown on

Euro-Rate = Moneyline Telerate Service display page 3750

------------------------------------------------

1.00 - Euro-Rate Reserve Percentage

The Euro-Rate shall be adjusted with respect to any Loan to

which the Euro-Rate Option applies that is outstanding on the effective date of

any change in the Euro-Rate Reserve Percentage as of such effective date. The

Agent shall give prompt notice to the Borrower of the Euro-Rate as determined or

adjusted in accordance herewith, which determination shall be conclusive absent

manifest error.

Euro-Rate Option shall mean the option of the Borrower to have

Revolving Credit Loans bear interest at the rate and under the terms and

conditions set forth in Section 4.1.1(ii).

Euro-Rate Reserve Percentage shall mean as of any day the

maximum percentage in effect on such day as prescribed by the Board of Governors

of the Federal Reserve System (or any successor) for determining the reserve

requirements (including supplemental, marginal and emergency reserve

requirements) with respect to eurocurrency funding (currently referred to as

"Eurocurrency Liabilities").

Event of Default shall mean any of the events described in

Section 9.1 and referred to therein as an "Event of Default."

Executive Order No. 13224 shall mean the Executive Order No.

13224 on Terrorist Financing, effective September 24, 2001, as the same has

been, or shall hereafter be, renewed, extended, amended or replaced.

Existing Credit Facility shall mean that certain Credit

Agreement among the Borrower, the banks party thereto, Bank of Tokyo-Mitsubishi

Trust Company and JPMorgan Chase Bank NA, previously known as JPMorgan Chase

Bank, each in its capacity as a syndication agent, Fleet National Bank and

SunTrust Bank, each in its capacity as a documentation agent, and PNC Bank,

National Association, in its capacity as administrative agent for the Banks,

dated December 23, 2002 (as amended by that certain First Amendment, dated

August 13, 2003, that certain Second Amendment and Consent, dated December 19,

2003, that certain Third Amendment, dated July 12, 2004, and that certain Fourth

Amendment, dated August 31, 2004).

Existing Letters of Credit shall have the meaning assigned to

that term in Section 2.9.1.

Expiration Date shall mean, with respect to the Revolving

Credit Commitments, December 16, 2009.

Facility Fees collectively and Facility Fee separately shall

have the meaning given to such terms in Section 2.3.1.

<PAGE>

Facility Usage Fees collectively and Facility Usage Fee

separately shall have the meaning given to such terms in Section 2.3.2.

Federal Funds Open Rate for any day shall mean the rate per

annum (based on a year of 360 days and actual days elapsed) determined by the

Agent in accordance with its usual procedures (which determination shall be

conclusive absent manifest error) to be the "Open" rate for federal funds

transactions as of the opening of business for federal funds transactions among

members of the Federal Reserve System arranged by federal funds brokers on such

day, as quoted by Garvin Guybutler, any successor entity thereto, or any other

broker selected by the Agent, as set forth on the applicable Telerate display

page; provided, however, that if such day is not a Business Day, the Federal

Funds Open Rate for such day shall be the "Open" rate on the immediately

preceding Business Day, or if no such rate shall be quoted by a federal funds

broker at such time, such other rate as determined by the Agent in accordance

with its usual procedures.

GAAP shall mean generally accepted accounting principles as

are in effect in the United States from time to time, subject to the provisions

of Section 1.3, and applied on a consistent basis both as to classification of

items and amounts.

Governmental Acts shall have the meaning assigned to that term

in Section 2.9.8.

Guaranty of any Person shall mean any obligation of such

Person guaranteeing or in effect guaranteeing any liability or obligation of any

other Person in any manner, whether directly or indirectly, including any

agreement to indemnify or hold harmless any other Person, any performance bond

or other suretyship arrangement and any other form of assurance against loss,

except endorsement of negotiable or other instruments for deposit or collection

in the ordinary course of business.

Hedging Contract Policies shall mean the written internal

policies and procedures with respect to hedging or trading of gas contracts or

other commodity, hedging contracts of any kind, or any derivatives or other

similar financial instruments of the Parent and its Subsidiaries, as in effect

on the date of this Agreement and as hereafter amended in accordance with

Section 8.2.16, a copy of which has been delivered to the Agent and each Bank.

Hedging Transaction shall mean any transaction entered into by

the Borrower or any of its Subsidiaries in accordance with the Hedging Contract

Policies.

Historical Statements shall have the meaning assigned to that

term in Section 6.1.8(i).

Hybrid Security shall mean any of the following: (i)

beneficial interests issued by a trust which constitutes a Subsidiary of the

Borrower, substantially all of the assets of which trust are unsecured

Indebtedness of the Borrower or any Subsidiary of the Borrower or proceeds

thereof, and all payments of which Indebtedness are required to be, and are,

distributed

<PAGE>

to the holders of beneficial interests in such trust promptly after receipt by

such trust, or (ii) any shares of capital stock or other equity interest that,

other than solely at the option of the issuer thereof, by their terms (or by the

terms of any security into which they are convertible or exchangeable) are, or

upon the happening of an event or the passage of time would be, required to be

redeemed or repurchased, in whole or in part, or have, or upon the happening of

an event or the passage of time would have, a redemption or similar payment.

Inactive Subsidiary shall mean, at any time, any Subsidiary of

any Person, which Subsidiary (i) does not conduct any business or have

operations, and (ii) does not have total assets with a net book value, as of any

date of determination, in excess of $100,000.

Indebtedness shall mean, as to any Person at any time, any and

all indebtedness, obligations or liabilities (whether matured or unmatured,

liquidated or unliquidated, direct or indirect, absolute or contingent, or joint

or several) of such Person for or in respect of: (i) borrowed money, (ii)

amounts raised under or liabilities in respect of any note purchase or

acceptance credit facility, (iii) reimbursement obligations (contingent or

otherwise) under any letter of credit, currency swap agreement, interest rate

swap, cap, collar or floor agreement or other interest rate or currency exchange

rate management device, (iv) any other transaction (including forward sale or

purchase agreements, capitalized leases and conditional sales agreements) having

the commercial effect of a borrowing of money entered into by such Person to

finance its operations or capital requirements (but not including trade payables

and accrued expenses incurred in the ordinary course of business which are not

represented by a promissory note or other evidence of indebtedness and which are

not more than thirty (30) days past due), (v) any Hedging Transaction, to the

extent that any indebtedness, obligations or liabilities of such Person in

respect thereof constitutes "indebtedness" as determined in accordance with

GAAP, (vi) any Guaranty of any Hedging Transaction described in the immediately

preceding clause (v), (vii) any Guaranty of Indebtedness for borrowed money,

(viii) any Hybrid Security described in clause (i) of the definition of Hybrid

Security, or (ix) the mandatory repayment obligation of the issuer of any Hybrid

Security described in clause (ii) of the definition of Hybrid Security.

Ineligible Security shall mean any security which may not be

underwritten or dealt in by member banks of the Federal Reserve System under

Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as

amended.

Insolvency Proceeding shall mean, with respect to any Person,

(a) a case, action or proceeding with respect to such Person (i) before any

court or any other Official Body under any bankruptcy, insolvency,

reorganization or other similar Law now or hereafter in effect, or (ii) for the

appointment of a receiver, liquidator, assignee, custodian, trustee,

sequestrator, conservator (or similar official) of such Person or otherwise

relating to the liquidation, dissolution, winding-up or relief of such Person,

or (b) any general assignment for the benefit of creditors, composition,

marshaling of assets for creditors, or other, similar arrangement in respect of

such Person's creditors generally or any substantial portion of its creditors;

undertaken under any Law.

<PAGE>

Interest Period shall mean the period of time selected by the

Borrower in connection with (and to apply to) any election permitted hereunder

by the Borrower to have Revolving Credit Loans bear interest under the Euro-Rate

Option. Subject to the last sentence of this definition, such period shall be

one, two, three or six Months, and solely with approval of the Agent a shorter

period. Such Interest Period shall commence on the effective date of such

Interest Rate Option, which shall be (i) the Borrowing Date if the Borrower is

requesting new Loans, or (ii) the date of renewal of or conversion to the

Euro-Rate Option if the Borrower is renewing or converting to the Euro-Rate

Option applicable to outstanding Loans. Notwithstanding the second sentence

hereof: (A) any Interest Period which would otherwise end on a date which is not

a Business Day shall be extended to the next succeeding Business Day unless such

Business Day falls in the next calendar month, in which case such Interest

Period shall end on the next preceding Business Day, and (B) the Borrower shall

not select, convert to or renew an Interest Period for any portion of the Loans

that would end after the Expiration Date.

IRH Provider shall have the meaning assigned to such term in

Section 9.2.5.2 [Collateral Sharing].

Interest Rate Hedge shall mean an interest rate exchange,

collar, cap, swap, adjustable strike cap, adjustable strike corridor or similar

agreements entered into by the Borrower or its Subsidiaries in order to provide

protection to, or minimize the impact upon, the Borrower and/or its Subsidiaries

of increasing floating rates of interest applicable to Indebtedness.

Interest Rate Option shall mean any Euro-Rate Option or Base

Rate Option.

Internal Revenue Code shall mean the Internal Revenue Code of

1986, as the same may be amended or supplemented from time to time, and any

successor statute of similar import, and the rules and regulations thereunder,

as from time to time in effect.

Investment shall have the meaning assigned to that term in

Section 8.2.4.

Labor Contracts shall mean all employment agreements,

employment contracts, collective bargaining agreements and other agreements

among the Borrower or any Subsidiary of the Borrower and its employees.

Law shall mean any law (including common law), constitution,

statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,

injunction, writ, decree, bond, judgment, authorization or approval, lien or

award of or settlement agreement with any Official Body.

Letter of Credit shall have the meaning assigned to that term

in Section 2.9.1.

Letter of Credit Borrowing shall have the meaning assigned to

such term in Section 2.9.3.4.

<PAGE>

Letter of Credit Fee shall have the meaning assigned to that term in

Section 2.9.2.

Letters of Credit Outstanding shall mean at any time the sum of (i)

the aggregate undrawn face amount of outstanding Letters of Credit and (ii) the

aggregate amount of all unpaid and outstanding Reimbursement Obligations and

Letter of Credit Borrowings.

Lien shall mean any mortgage, deed of trust, pledge, lien, security

interest, charge or other encumbrance or security arrangement of any nature

whatsoever, whether voluntarily or involuntarily given, including any

conditional sale or title retention arrangement, and any assignment, deposit

arrangement or lease intended as, or having the effect of, security and any

filed financing statement or other notice of any of the foregoing (whether or

not a lien or other encumbrance is created or exists at the time of the filing).

LLC Interests shall have the meaning given to such term in Section

6.1.2.

Loan Documents shall mean this Agreement, the Agent's Letter, the

Notes (if any), and any other instruments, certificates or documents delivered

or contemplated to be delivered hereunder or thereunder or in connection

herewith or therewith, as the same may be supplemented or amended from time to

time in accordance herewith or therewith, and Loan Document shall mean any of

the Loan Documents.

Loan Request shall mean a request for a Revolving Credit Loan or a

request to select, convert to or renew a Base Rate Option or Euro-Rate Option

with respect to an outstanding Revolving Credit Loan in accordance with Sections

2.4, 2.5, 4.1 and 4.2.

Loans shall mean collectively and Loan shall mean separately all

Revolving Credit Loans and Swing Loans or any Revolving Credit Loan or Swing

Loan.

Material Adverse Change shall mean any set of circumstances or

events which (a) has or could reasonably be expected to have any material

adverse effect whatsoever upon the validity or enforceability of this Agreement

or any other Loan Document, (b) is or could reasonably be expected to be

material and adverse to the business, properties, assets, financial condition,

results of operations or prospects of the Borrower, (c) impairs materially or

could reasonably be expected to impair materially the ability of the Borrower to

duly and punctually pay the Indebtedness or otherwise perform the obligations in

accordance with the Loan Documents, or (d) impairs materially or could

reasonably be expected to impair materially the ability of the Agent or any of

the Banks, to the extent permitted, to enforce their legal remedies pursuant to

this Agreement or any other Loan Document.

Month, with respect to an Interest Period under the Euro-Rate

Option, shall mean the interval between the days in consecutive calendar months

numerically corresponding to the first day of such Interest Period. If any

Euro-Rate Interest Period begins on a day of a calendar month for which there is

no numerically corresponding day in the month in

<PAGE>

which such Interest Period is to end, the final month of such Interest Period

shall be deemed to end on the last Business Day of such final month.

Moody's shall mean Moody's Investors Service, Inc. and its

successors.

Mortgage Indenture shall mean that certain Indenture of Mortgage and

Deed of Trust dated April 1, 1952 from the Borrower to BNY Midwest Trust

Company, as successor to Harris Trust and Savings Bank, Trustee, as heretofore

and hereafter amended, modified and supplemented.

Multiemployer Plan shall mean any employee benefit plan which is a

"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to

which the Borrower or any member of the ERISA Group is then making or accruing

an obligation to make contributions or, within the preceding five Plan years,

has made or had an obligation to make such contributions.

Multiple Employer Plan shall mean a Plan which has two or more

contributing sponsors (including the Borrower or any member of the ERISA Group)

at least two of whom are not under common control, as such a plan is described

in Sections 4063 and 4064 of ERISA.

Net Cash Proceeds shall mean, with respect to any issuance of debt

or a Hybrid Security, an amount equal to the cash proceeds received by the

Borrower or any of its Subsidiaries from or in respect of such transaction

(including, when received: (i) any cash proceeds received as income or other

deferred cash proceeds, or (ii) cash proceeds of any non-cash proceeds of such

transaction), less all investment banking fees, discounts and commissions, legal

fees, consulting fees, accountants' fees, underwriting discounts and commissions

and other customary and reasonable fees and expenses actually incurred in

connection therewith.

NJNG Note Agreement shall mean the Note Agreement, dated March 15,

2004, as the same may be supplemented, amended, or modified from time to time as

permitted by Section 8.2.18 [Amendments to NJNG Note Agreement] hereof.

NJNG Notes shall mean the unsecured Indebtedness issued by the

Borrower pursuant to the NJNG Note Agreement.

Notes shall mean the Revolving Credit Notes and Swing Loan Note, if

any.

Notices shall have the meaning assigned to that term in Section

11.6.

Obligations shall mean any obligation or liability of the Borrower

to the Agent or any of the Banks, howsoever created, arising or evidenced,

whether direct or indirect, absolute or contingent, now or hereafter existing,

or due or to become due, under or in connection with this Agreement, any Notes,

the Letters of Credit, the Agent's Letter or any other Loan Document.

Obligations shall include the liabilities to any Bank under any Bank-Provided

<PAGE>

Interest Rate Hedge but shall not include the liabilities to other Persons under

any other Interest Rate Hedge.

Official Body shall mean any national, federal, state, local or

other government or political subdivision or any agency, authority, board,

bureau, central bank, commission, department or instrumentality of either, or

any court, tribunal, grand jury or arbitrator, in each case whether foreign or

domestic.

Parent shall mean New Jersey Resources Corporation, a corporation

organized and existing under the laws of the State of New Jersey, of which

Borrower is a wholly owned Subsidiary.

Participation Advance shall mean, with respect to any Bank, such

Bank's payment in respect of its participation in a Letter of Credit Borrowing

according to its Ratable Share pursuant to Section 2.9.3.4.

Partnership Interests shall have the meaning given to such term in

Section 6.1.2.

PBGC shall mean the Pension Benefit Guaranty Corporation established

pursuant to Subtitle A of Title IV of ERISA or any successor.

Permitted Acquisitions shall have the meaning assigned to such term

in Section 8.2.5 [Liquidations, Mergers, Consolidations, Acquisitions].

Permitted Investments shall mean:

(i) direct obligations of the United States of America or any agency

or instrumentality thereof or obligations backed by the full faith and credit of

the United States of America maturing in twelve (12) months or less from the

date of acquisition;

(ii) repurchase agreements having a duration of not more than sixty

(60) days that are collateralized by full faith and credit obligations of the

United States Government or obligations guaranteed by the United States

Government and its agencies;

(iii) interests in investment companies registered under the

Investment Company Act of 1940, as amended (or in a separate portfolio of such

an investment company), that invest primarily in full faith and credit

obligations of the United States Government or obligations guaranteed by the

United States Government and its agencies and repurchase agreements

collateralized by such obligations;

(iv) time deposits with any office located in the United States of

the Banks or any other bank or trust company which is organized under the laws

of the United States and has combined capital, surplus and undivided profits of

not less than $500,000,000 or with any bank which is organized other than under

the laws of the United States (y) the commercial paper of which is rated at

least A-1 by Standard & Poor's and P-1 by Moody's (or, if such

<PAGE>

commercial paper is rated only by Standard & Poor's, at least A-1 by Standard &

Poor's, or if such commercial paper is rated only by Moody's, at least P-1 by

Moody's) or (z) the long term senior debt of which is rated at least AA by

Standard & Poor's and Aa2 by Moody's (or, if such debt is rated only by Standard

& Poor's, at least AA by Standard & Poor's, or if such debt is rated only by

Moody's, at least Aa2 by Moody's);

(v) commercial paper having a maturity of not more than one year

from the date of such investment and rated at least A-1 by Standard & Poor's and

P-1 by Moody's (or, if such commercial paper is rated only by Standard & Poor's,

at least A-1 by Standard & Poor's or, if such commercial paper is rated only by

Moody's, at least P-1 by Moody's);

(vi) instruments held for collection in the ordinary course of

business;

(vii) any equity or debt securities or other form of debt instrument

obtained in settlement of debts previously contracted; and

(viii) any Investment arising out of a Permitted Related Business

Opportunity.

Permitted Liens shall mean:

(i) Liens for taxes, assessments, or similar charges, incurred in

the ordinary course of business and which are not yet due and payable;

(ii) Pledges or deposits made in the ordinary course of business to

secure payment of workmen's compensation, or to participate in any fund in

connection with workmen's compensation, unemployment insurance, old-age pensions

or other social security programs;

(iii) Liens of mechanics, materialmen, warehousemen, carriers, or

other like Liens, securing obligations incurred in the ordinary course of

business that are not yet due and payable and Liens of landlords securing

obligations to pay lease payments that are not yet due and payable or in

default;

(iv) Any Lien arising out of judgments or awards but only to the

extent that the creation of any such Lien shall not be an event or condition

which, with or without notice or lapse of time or both, would cause Borrower to

be in violation of Section 9.1.6;

(v) Security interests in favor of lessors of personal property,

which property is the subject of a true lease;

(vi) Good-faith pledges or deposits made in the ordinary course of

business to secure performance of bids, tenders, contracts (other than for the

repayment of borrowed money) or leases, not in excess of the aggregate amount

due thereunder, or to secure statutory obligations, or surety, appeal,

indemnity, performance or other similar bonds required in the ordinary course of

business;

<PAGE>

(vii) Encumbrances consisting of zoning restrictions, easements,

rights-of-way or other restrictions on the use of real property and minor

defects to title to real property, none of which materially impairs the use of

such property or the value thereof;

(viii) Liens on property leased by the Borrower or any Subsidiary of

the Borrower securing obligations of the Borrower or such Subsidiary to the

lessor under such leases, so long as to the extent the payments or other amounts

due and owing under any such lease constitute Indebtedness, such Indebtedness is

permitted under Section 8.2.1;

(ix) Any Lien existing on the date of this Agreement and described

on Schedule 1.1(P), provided, that, to the extent any such Lien secures

Indebtedness permitted by Section 8.2.1(ii), such Lien may continue to secure

any renewals or extensions of such Indebtedness permitted by Section 8.2.1(ii)

so long as (i) the principal amount of the Indebtedness secured by any such Lien

is not hereafter increased and (ii) no additional assets become subject to such

Lien;

(x) Liens on assets of the Borrower existing on the Closing Date

(other than on any "Excepted Property" of the Borrower, as "Excepted Property"

is defined in the Mortgage Indenture on the Closing Date), which Liens secure

outstanding Indebtedness as of the Closing Date under the Mortgage Indenture and

thereafter Liens on assets of the Borrower (other than on any "Excepted

Property") which additional Liens secure outstanding Indebtedness as of the

Closing Date under the Mortgage Indenture and any additional Indebtedness which

is issued in accordance with Article Two of the Mortgage Indenture and is

otherwise permitted by Section 8.2.1(iii);

(xi) Purchase Money Security Interests, provided, that the aggregate

amount of loans and deferred payments secured by such Purchase Money Security

Interests shall not exceed $20,000,000 (excluding for the purpose of this

computation any loans or deferred payments secured by Liens described on

Schedule 1.1(P));

(xii) Liens on any property or asset of an Acquired Person so long

as: (a) such Liens secure Indebtedness of the Acquired Person and such

Indebtedness and such Liens on property or assets of the Acquired Person existed

prior to the consummation of the Permitted Acquisition and were not created in

contemplation of or in connection with such acquisition, (b) such Liens apply

solely to the assets of the Acquired Person and do not apply to any asset of the

Borrower or any Subsidiary of the Borrower, and (c) after giving effect to such

Permitted Acquisition and all other Permitted Acquisitions made by the Borrower

and any Subsidiary of the Borrower from and after the Closing Date, the

aggregate outstanding amount of all Indebtedness secured by Liens permitted by

this clause (xii) shall not exceed $75,000,000; and

(xiii) The following, (A) if the validity or amount thereof is being

contested in good faith by appropriate and lawful proceedings diligently

conducted so long as levy and execution thereon have been stayed and continue to

be stayed or (B) if a final judgment is entered and such judgment is discharged

within thirty (30) days of entry, and could not be reasonably expected to result

in a Material Adverse Change:

<PAGE>

(1) Claims or Liens for taxes, assessments or charges due and

payable and subject to interest or penalty, provided that the Borrower or

any of its Subsidiaries, as applicable, maintains such reserves or other

appropriate provisions as shall be required by GAAP and pays all such

taxes, assessments or charges forthwith upon the commencement of

proceedings to foreclose any such Lien;

(2) Claims, Liens or encumbrances upon, and defects of title

to, real or personal property, including any attachment of personal or

real property or other legal process prior to adjudication of a dispute on

the merits; or

(3) Claims or Liens of mechanics, materialmen, warehousemen,

carriers, or other statutory nonconsensual Liens.

Permitted Related Business Opportunity shall mean any transaction

with another Person (other than any Inactive Subsidiary of Parent) involving

business activities or assets reasonably related or complementary to the

business of the Borrower and its Subsidiaries as conducted on the Closing Date

or as may be conducted pursuant to Section 8.2.9, including, without limitation,

the management and marketing of storage, capacity and transportation of gas and

other forms of energy, the generation, transmission or storage of gas and other

forms of energy, or the access to gas and energy transmission lines, and

business initiatives for the conservation and efficiency of gas and energy.

Permitted Transferee shall mean, as of any date of determination,

any of the following with respect to any then current officer or director of the

Parent: (i) such Person's spouse, lineal descendants or lineal descendant's of

such Person's spouse, (ii) any charitable corporation or trust established by

such officer or director or by any Person described in the immediately preceding

clause (i), (iii) any trust (or in the case of a minor, a custodial account

under a Uniform Gifts or Transfers to Minors Act) of which the beneficiary or

beneficiaries are one or more Persons described in the immediately preceding

clauses (i) or (ii), or (iv) any executor or administrator upon the death of

such officer or director or the death of any Person described in the immediately

preceding clauses (i) or (ii).

Person shall mean any individual, corporation, partnership, limited

liability company, association, joint-stock company, trust, unincorporated

organization, joint venture, government or political subdivision or agency

thereof, or any other entity.

Plan shall mean at any time an employee pension benefit plan

(including a Multiple Employer Plan, but not a Multiemployer Plan) which is

covered by Title IV of ERISA or is subject to the minimum funding standards

under Section 412 of the Internal Revenue Code and either (i) is maintained by

any member of the ERISA Group for employees of any member of the ERISA Group or

(ii) has at any time within the preceding five years been maintained by any

entity which was at such time a member of the ERISA Group for employees of any

entity which was at such time a member of the ERISA Group.

<PAGE>

PNC Bank shall mean PNC Bank, National Association, its successors

and assigns.

Potential Default shall mean any event or condition which with

notice, passage of time, or both, would constitute an Event of Default.

Principal Office shall mean the main banking office of the Agent in

Pittsburgh, Pennsylvania.

Prohibited Transaction shall mean any prohibited transaction as

defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for

which neither an individual nor a class exemption has been issued by the United

States Department of Labor.

Property shall mean all real property, both owned and leased, of the

Borrower or any Subsidiary of the Borrower.

Purchase Money Security Interest shall mean Liens upon tangible

personal property securing loans to the Borrower or any Subsidiary of the

Borrower or deferred payments by the Borrower or such Subsidiary for the

purchase of such tangible personal property.

Purchasing Bank shall mean a Bank which becomes a party to this

Agreement by executing an Assignment and Assumption Agreement.

Ratable Share shall mean the proportion that a Bank's Commitment

(excluding its Swing Loan Commitment) bears to the Commitments (excluding the

Swing Loan Commitment) of all of the Banks.

Regulated Entity shall mean any Person which is subject under Law to

any of the laws, rules or regulations respecting the financial, organizational

or rate regulation of electric companies, public utilities, or public utility

holding companies.

Regulated Substances shall mean, without limitation, any substance,

material or waste, regardless of its form or nature, defined under Environmental

Laws as a "hazardous substance," "pollutant," "pollution," "contaminant,"

"hazardous or toxic substance," "extremely hazardous substance," "toxic

chemical," "toxic substance," "toxic waste," "hazardous waste," "special

handling waste," "industrial waste," "residual waste," "solid waste," "municipal

waste," "mixed waste," "infectious waste," "chemotherapeutic waste," "medical

waste," or "regulated substance", or any other substance, material or waste,

regardless of its form or nature, which is regulated, controlled or governed by

Environmental Laws due to its radioactive, ignitable, corrosive, reactive,

explosive, toxic, carcinogenic or infectious properties or nature or any other

material, substance or waste, regardless of its form or nature, which otherwise

is regulated, controlled or governed by Environmental Laws, including without

limitation, petroleum and petroleum products (including crude oil and any

fractions thereof), natural gas, synthetic gas and any mixtures thereof,

asbestos, urea formaldehyde, polychlorinated biphenlys, mercury, radon and

radioactive materials.

<PAGE>

Regulation U shall mean Regulation U, T, G, or X as promulgated by

the Board of Governors of the Federal Reserve System, as amended from time to

time.

Reimbursement Obligation shall have the meaning assigned to such

term in Section 2.9.3.2.

Remedial Action shall mean any investigation, identification,

characterization, delineation, cleanup, removal, remediation, containment,

control or abatement of or other response actions to Regulated Substances and

any closure or post-closure measures associated therewith.

Reportable Event shall mean a reportable event described in Section

4043 of ERISA and regulations thereunder with respect to a Plan or Multiemployer

Plan.

Required Banks shall mean

(A) if there are no Loans, Reimbursement Obligations or Letter of

Credit Borrowings outstanding, Required Banks shall mean Banks whose Commitments

(excluding the Swing Loan Commitments) aggregate at least 51% of the Commitments

of all of the Banks, or

(B) if there are Loans, Reimbursement Obligations, or Letter of

Credit Borrowings outstanding, Required Banks shall mean:

(i) prior to a termination of the Commitments hereunder

pursuant to Section 9.2.1 or 9.2.2, any Bank or group of Banks if the sum of the

Loans (excluding the Swing Loans), Reimbursement Obligations and Letter of

Credit Borrowings of such Banks then outstanding aggregates at least 51% of the

total principal amount of all of the Loans (excluding the Swing Loans),

Reimbursement Obligations and Letter of Credit Borrowings then outstanding.

(ii) after a termination of the Commitments hereunder pursuant

to Section 9.2.1 or 9.2.2, any Bank or group of Banks if the sum of the Loans,

Reimbursement Obligations and Letter of Credit Borrowings of such Banks then

outstanding aggregates at least 51% of the total principal amount of all of the

Loans, Reimbursement Obligations and Letter of Credit Borrowings then

outstanding.

Reimbursement Obligations and Letter of Credit Borrowings shall be deemed, for

purposes of this definition, to be in favor of the Agent and not a participating

Bank if such Bank has not made its Participation Advance in respect thereof and

shall be deemed to be in favor of such Bank to the extent of its Participation

Advance if it has made its Participation Advance in respect thereof.

Required Share shall have the meaning assigned to such term in

Section 5.10.

<PAGE>

Revolving Credit Commitment shall mean, as to any Bank at any time,

the amount initially set forth opposite its name on Schedule 1.1(B) in the

column labeled "Amount of Commitment for Revolving Credit Loans," and thereafter

as determined by the Agent after giving effect to each applicable Bank Joinder

and Assignment and Assumption Agreement executed by such Bank and delivered to

the Agent, and Revolving Credit Commitments shall mean the aggregate Revolving

Credit Commitments of all of the Banks.

Revolving Credit Loans shall mean collectively and Revolving Credit

Loan shall mean separately all Revolving Credit Loans or any Revolving Credit

Loan made by the Banks or one of the Banks to the Borrower pursuant to Section

2.1.1 or 2.9.3.

Revolving Credit Note shall mean any Revolving Credit Note of the

Borrower in the form of Exhibit 1.1(R) issued by the Borrower at the request of

a Bank pursuant to Section 5.9 evidencing the Revolving Credit Loans to such

Bank, together with all amendments, extensions, renewals, replacements,

refinancings or refundings thereof in whole or in part.

Revolving Facility Usage shall mean at any time the sum of the

Revolving Credit Loans outstanding, the Swing Loans outstanding and the Letters

of Credit Outstanding.

SEC shall mean the Securities and Exchange Commission or any

governmental agencies substituted therefor.

SEC Filings shall mean the Parent's Form 10-K, filed with the SEC

for the fiscal year ended September 30, 2004 and Forms 10-Q, the first filed

with the SEC for the fiscal quarter ended December 31, 2003, the second filed

with SEC for the fiscal quarter ended March 31, 2004 and the third filed with

the SEC for the fiscal quarter ended June 30, 2004.

Section 20 Subsidiary shall mean the Subsidiary of the bank holding

company controlling any Bank, which Subsidiary has been granted authority by the

Federal Reserve Board to underwrite and deal in certain Ineligible Securities.

Settlement Date shall mean the 7th day of each week (if such day is

a Business Day and if not, the next succeeding Business Day) and any other

Business Day on which the Agent elects to effect settlement pursuant to Section

5.10.

Significant Subsidiary shall mean, any Subsidiary of the Borrower

which at any time (i) has gross revenues equal to or in excess of five percent

(5%) of the gross revenues of the Borrower and its Subsidiaries on a

consolidated basis, or (ii) has total assets equal to or in excess of five

percent (5%) of the total assets of the Borrower and its Subsidiaries on a

consolidated basis, in either case, as determined and consolidated in accordance

with GAAP.

Solvent shall mean, with respect to any Person on a particular date,

that on such date (i) such Person is able to realize upon its assets and pay its

debts and other liabilities as they mature in the normal course of business, and

(ii) such Person has not incurred debts or liabilities beyond such Person's

ability to pay as such debts and liabilities mature.

<PAGE>

Standard & Poor's shall mean Standard & Poor's Ratings Services, a

division of The McGraw-Hill Companies, Inc., and its successors.

Standby Letter of Credit shall mean a Letter of Credit issued to

support obligations of the Borrower, contingent or otherwise, which finances the

working capital and business needs of the Borrower incurred in the ordinary

course of its business, but excluding any Letter of Credit under which the

stated amount of such Letter of Credit increases automatically over time.

Subsidiary of any Person at any time shall mean (i) any corporation

or trust of which 50% or more (by number of shares or number of votes) of the

outstanding capital stock or shares of beneficial interest normally entitled to

vote for the election of one or more directors or trustees (regardless of any

contingency which does or may suspend or dilute the voting rights) is at such

time owned directly or indirectly by such Person or one or more of such Person's

Subsidiaries, (ii) any partnership of which such Person is a general partner or

of which 50% or more of the partnership interests is at the time directly or

indirectly owned by such Person or one or more of such Person's Subsidiaries,

(iii) any limited liability company of which such Person is a member or of which

50% or more of the limited liability company interests is at the time directly

or indirectly owned by such Person or one or more of such Person's Subsidiaries

or (iv) any corporation, trust, partnership, limited liability company or other

entity which is controlled or capable of being controlled by such Person or one

or more of such Person's Subsidiaries.

Subsidiary Shares shall have the meaning assigned to that term in

Section 6.1.2.

Swing Loan Commitment shall mean PNC Bank's commitment to make Swing

Loans to the Borrower pursuant to Section 2.1.2 hereof in an aggregate principal

amount up to $35,000,000.

Swing Loan Interest Rate shall mean as to each Swing Loan the rate

of interest quoted by PNC Bank applicable thereto and accepted by the Borrower

with respect to such Swing Loan.

Swing Loan Note shall mean the Swing Loan Note of the Borrower in

the form of Exhibit 1.1(S) evidencing the Swing Loans, together with all

amendments, extensions, renewals, replacements, refinancings or refundings

thereof in whole or in part.

Swing Loan Request shall mean a request for Swing Loans made in

accordance with Section 2.5 hereof.

Swing Loans shall mean collectively and Swing Loan shall mean

separately all Swing Loans or any Swing Loan made by PNC Bank to the Borrower

pursuant to Section 2.1.2 hereof.

<PAGE>

Transferor Bank shall mean the selling Bank pursuant to an

Assignment and Assumption Agreement.

USA Patriot Act shall mean the Uniting and Strengthening America by

Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of

2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed,

extended, amended or replaced.

1.2 Construction.

Unless the context of this Agreement otherwise clearly requires, the

following rules of construction shall apply to this Agreement and each of the

AGREEMENTS / CONTRACTS

CLAUSES

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