NEW ISSUE – BOOK-ENTRY-ONLY RATINGS: See “RATINGS” herein In the opinion of Cozen O’Connor, Bond Counsel to the Authority (as hereinafter defined), interest on the 2007 Notes is includable in the gross income of the holder thereof for federal income taxation under existing statutes, regulations, rulings and court decisions. Under the laws of the State of New Jersey, interest on the 2007 Notes and any gain on the sale thereof is not includable as gross income under the New Jersey Gross Income Tax Act. For a more complete discussion, see “TAX MATTERS” herein.

$22,390,000 SOUTH JERSEY TRANSPORTATION AUTHORITY Taxable Subordinated Notes, Series 2007 Interest Rate: 5.50% Per Annum Yield: 5.60% Dated: Date of Delivery Due: January 1, 2010 The South Jersey Transportation Authority (“Authority”) is issuing its $22,390,000 Taxable Subordinated Notes, Series 2007 (“2007 Notes”) pursuant to the South Jersey Transportation Authority Act, as amended and supplemented (“Act”), the Authority’s Second Amended and Restated Resolution Authorizing Revenue Bonds and Other Obligations, adopted on April 19, 2005, as amended as of May 11, 2005 by a Certificate of the Acting Executive Director in accordance with Section 12.13 thereof (collectively, the “Resolution”), and the Authority’s 2007 Subordinated Note Resolution, adopted on June 19, 2007, and a Series Certificate of the Authority, dated the date of sale of the 2007 Notes, making certain determinations in connection therewith (collectively, the “2007 Note Resolution”). The 2007 Notes are issuable as fully registered notes in book-entry form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the 2007 Notes. Purchases of beneficial ownership interests in the 2007 Notes may be made only through the DTC book-entry system and may be made only in denominations of $5,000 or any integral multiple thereof. Beneficial Owners (as defined herein) of the 2007 Notes will not receive certificates representing their interests in the 2007 Notes. The 2007 Notes will be dated the date of initial issuance and delivery thereof, will bear interest at a rate of five and fifty one hundredths percent (5.50%) per annum, calculated on the basis of a year of 360 days consisting of twelve 30-day months. Interest on the 2007 Notes is payable initially on January 1, 2008 and semi-annually thereafter on July 1 and January 1 until maturity or earlier redemption or acceleration; provided, however, that the 2007 Notes may not be accelerated unless the Bonds issued under the Resolution are accelerated. The principal of the 2007 Notes will be payable in full on January 1, 2010 (“Maturity Date”), unless the 2007 Notes become due and payable earlier upon redemption or acceleration prior to maturity; provided, however, that the 2007 Notes may not be accelerated unless the Bonds issued under the Resolution are accelerated. So long as Cede & Co. is the registered owner of the 2007 Notes, payments of principal of and interest on the 2007 Notes will be made directly by The Bank of New York, West Paterson, New Jersey, as paying agent (“Paying Agent”) under the 2007 Note Resolution, as described herein. See “THE 2007 NOTES – Book-Entry-Only System” herein. The 2007 Notes are subject to optional redemption, without premium, priority to maturity. See “THE 2007 NOTES – Redemption” herein. THE 2007 NOTES ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE PROPERTY PLEDGED TO THE PAYMENT OF THE 2007 NOTES AS CONTAINED IN THE 2007 NOTE RESOLUTION, AND NEITHER THE STATE OF NEW JERSEY NOR ANY INSTRUMENTALITY THEREOF, OTHER THAN THE AUTHORITY (TO THE LIMITED EXTENT SET FORTH IN THE 2007 NOTE RESOLUTION), IS OBLIGATED TO PAY THE 2007 NOTES, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NEW JERSEY OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2007 NOTES. THE AUTHORITY HAS NO TAXING POWER. The proceeds of the 2007 Notes will be used to finance the costs of one or more capital projects (collectively, the “2007 Capital Projects”) and paying the costs of issuance of, and capitalized interest on a portion of the 2007 Notes. See “PLAN OF FINANCING” herein. The 2007 Notes are subordinated in all respects to the provisions of the Resolution and the lien and pledge created by the Resolution in favor of the Bonds issued thereunder. All principal of and interest on the Bonds issued under the Resolution must be paid before any further payment of principal of or interest on the 2007 Notes if an event of default under the Resolution occurs which results in non-payment or acceleration of such Bonds, or upon the insolvency of the Authority. The scheduled payment of the principal of and interest on the 2007 Notes when due will be guaranteed under a municipal bond insurance policy (“Policy”) to be issued concurrently with the delivery of the 2007 Notes by Financial Security Assurance Inc. (“Financial Security” or “Bond Insurer”). See “BOND INSURANCE” herein.

Investors must read this entire Official Statement, including the Appendices hereto, to obtain information essential to the making of an informed investment decision. This cover page contains information for quick reference only. It is not a summary of this issue. The 2007 Notes are offered, when, as and if issued by the Authority, subject to prior sale, withdrawal or modification of the offer without notice, and subject to the approval of legality by Cozen O’Connor, Newark, New Jersey, Bond Counsel. Certain legal matters will be passed upon for the Authority by its General Counsel, Florio Perrucci Steinhardt & Fader, L.L.C., Phillipsburg, New Jersey, and for the Underwriter by Parker McCay P.A., Marlton, New Jersey. It is expected that delivery of the 2007 Notes to DTC in New York, New York or its agent, will take place on or about July 12, 2007. Citi Dated: July 5, 2007 SOUTH JERSEY TRANSPORTATION AUTHORITY

Farley Service Plaza P.O. Box 351 Hammonton, New Jersey 08037 (609) 965-6060

MEMBERS OF THE AUTHORITY

Kris Kolluri, Esq., Chairman Mark Summerville, Vice-Chairman Ex-Officio, NJDOT, Commissioner

Jeffrey A. April, Esq. Louis Toscano

Ernest Coursey Virginia S. Bauer, Ex-Officio, NJDOC Secretary/CEO James M. Gaymon, Jr.

SENIOR STAFF

Bart R. Mueller Kathleen C. Aufschneider, PE, PP Executive Director Deputy Executive Director Director of Policy and Planning Dennis Culnan, Jr. Chief of Staff Wade Lawson Deputy Executive Director Kathleen M. Sharman, CPA Director of Tourist Services Treasurer/Director of Finance Sharon Gordon Thomas Rafter Director of Communications & Marketing Airport Director Carole Miller Samuel L. Donelson, P.E. Director of Parking/Transportation Services Director of Engineering and Expressway Operations/Chief Engineer

Joel Falk Director of Information and Technologies

ADVISORS

Florio Perrucci Steinhardt & Fader, L.L.C. Ford, Scott, Seidenburg & Kennedy, LLC General Counsel Independent Certified Public Accountants

Cozen O'Connor Wilbur Smith Associates Bond Counsel Traffic Engineering Consultants

Acacia Financial Group, Inc. Financial Advisor No dealer, broker, salesman, or any other person has been authorized to give any information or to make any representations with respect to the 2007 Notes, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the 2007 Notes by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guaranty the accuracy or completeness of such information.

The information in this Official Statement concerning The Depository Trust Company, New York, New York ("DTC") and DTC's book-entry-only system has been obtained from DTC, and the Authority and the Underwriter take no responsibility for the accuracy thereof. Such information has not been independently verified by the Authority or the Underwriter, and neither the Authority nor the Underwriter make any representation as to the accuracy or completeness of such information.

Other than with respect to information concerning Financial Security Assurance Inc. ("Financial Security" or "Bond Insurer") contained under the caption "BOND INSURANCE" herein and in APPENDIX G – "Specimen Municipal Bond Insurance Policy" hereto, none of the information in this Official Statement has been supplied or verified by Financial Security and Financial Security makes no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the 2007 Notes; or (iii) the taxable status of the interest on the 2007 Notes. Neither the Authority nor the Underwriter have confirmed the accuracy or completeness of the information relating to Financial Security or the bond insurance policy to be issued by Financial Security insuring the scheduled payment of the principal of and interest on the 2007 Notes ("Policy") when due. Therefore, the Authority and the Underwriter disclaim any responsibility for the accuracy or completeness of the information relating to Financial Security or the Policy contained herein.

The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in any of the information set forth herein since the date hereof, or the date as of which particular information is given, if earlier. This Official Statement is submitted in connection with the sale of the 2007 Notes referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

The order of presentation of information in this Official Statement, including the Appendices, is not to be construed as a determination of relevance or materiality and this Official Statement should be read in its entirety.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2007 NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT PRIOR NOTICE. THE UNDERWRITER MAY OFFER AND SELL THE 2007 NOTES TO CERTAIN DEALERS AT A PRICE LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE FRONT COVER HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE AUTHORITY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON OR CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS

Page

INTRODUCTION ...... 1 General...... 1 Creation of Authority...... 1 Authority Projects ...... 2 Transportation System ...... 4 Senior Lien Indebtedness...... 6 Subordinated Indebtedness ...... 6 Special Revenue Bonds...... 7 STATE OF NEW JERSEY ASSET EVALUATION PROGRAM...... 7 PLAN OF FINANCING...... 8 The 2007 Capital Projects...... 8 ESTIMATED SOURCES AND USES OF FUNDS ...... 9 THE 2007 NOTES...... 9 General...... 9 Certain Dates and Payment Terms...... 9 Redemption...... 10 Book-Entry-Only System...... 10 Discontinuance of Book-Entry-Only System ...... 13 BOND INSURANCE ...... 13 Bond Insurance Policy ...... 13 Financial Security Assurance Inc...... 13 SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES...... 14 General...... 14 Pledge Effected by the 2007 Note Resolution ...... 14 Subordination...... 15 Pledge of Net Revenues and Funds ...... 15 Flow of Funds ...... 16 Rate Covenant...... 19 Rate Regulation...... 20 Debt Service Reserve Fund...... 21 General and Pledged Projects ...... 22 Additional Bonds ...... 24 Other Forms of Obligations; Subordinated Indebtedness; Revenue Anticipation Notes...... 29 State Relationship to Bond Security ...... 31 DEBT SERVICE REQUIREMENTS...... 32 THE AUTHORITY ...... 33 Members and Management...... 33 Legal Authority and Purpose ...... 37 Powers of the Authority; State Oversight ...... 38 AUTHORIZED PROJECTS...... 39 ATLANTIC CITY EXPRESSWAY...... 40 Facilities...... 40 Electronic Toll Collection...... 42 Traffic Patterns ...... 43 Rates and Charges...... 46 Toll Revenues and Vehicles...... 48 ATLANTIC CITY/BRIGANTINE CONNECTOR ...... 50 General...... 50 CRDA Agreements ...... 50 TRANSPORTATION PROJECTS...... 51 Facilities...... 51 Factors Affecting Revenues From Transportation Projects...... 53 Page

AIRPORT ...... 53 Facilities...... 53 Operations...... 55 Traffic/Use...... 57 HISTORICAL OPERATING RESULTS...... 58 2002 Through 2006 Historical Operations...... 58 Management's Discussion of Historical Operating Results ...... 60 CAPITAL PLAN ...... 63 PROJECTED REVENUES, EXPENSES AND DEBT SERVICE COVERAGE ...... 64 Management's Discussion of Projected Revenues and Expenses ...... 66 OPERATIONAL FACTORS...... 67 Personnel Considerations...... 67 Regulatory Considerations...... 68 Environmental Considerations...... 70 Financial Considerations...... 71 LITIGATION...... 72 LEGAL MATTERS...... 72 ENFORCEABILITY OF REMEDIES ...... 73 LEGALITY FOR INVESTMENT...... 73 TAX MATTERS...... 73 RATINGS ...... 73 FINANCIAL STATEMENTS ...... 74 EXPERTS ...... 74 UNDERWRITING ...... 74 SECONDARY MARKET DISCLOSURE...... 74 MISCELLANEOUS ...... 75

APPENDIX A: Audited Financial Statements of the Authority, Year Ended December 31, 2006...... A-1 APPENDIX B: Copy of the Resolution...... B-1 APPENDIX C: Copy of the 2007 Note Resolution ...... C-1 APPENDIX D: Traffic Study...... D-1 APPENDIX E: Form of Continuing Disclosure Agreement ...... E-1 APPENDIX F: Form of Bond Counsel Opinion ...... F-1 APPENDIX G: Specimen Municipal Bond Insurance Policy...... G-1

(ii) OFFICIAL STATEMENT

Relating to

SOUTH JERSEY TRANSPORTATION AUTHORITY $22,390,000 TAXABLE SUBORDINATED NOTES, SERIES 2007

INTRODUCTION

General

The purpose of this Official Statement (which includes the cover page and the Appendices hereto) is to set forth certain information regarding the issuance by the South Jersey Transportation Authority ("Authority") of its $22,390,000 original principal amount of Taxable Subordinated Notes, Series 2007 ("2007 Notes"). The 2007 Notes are issued under and pursuant to the South Jersey Transportation Authority Act, Chapter 252 of the Laws of New Jersey of 1991, as amended and supplemented ("Act"), the Authority's Second Amended and Restated Resolution Authorizing Revenue Bonds and Other Obligations, adopted on April 19, 2005, as amended as of May 11, 2005 by a Certificate of the Acting Executive Director in accordance with Section 12.13 thereof (collectively, the "Resolution"), and the Authority's 2007 Subordinated Note Resolution, adopted on June 19, 2007, and a Series Certificate, dated the date of sale of the 2007 Notes, making certain determinations in connection with the issuance of the 2007 Notes (collectively, the "2007 Note Resolution"). Proceeds of the 2007 Notes will be used to finance: (i) the design of (a) a westbound third lane widening on the Atlantic City Expressway ("Expressway"), and (b) an Express EZ-Pass® at the Egg Harbor Toll Plaza on the Expressway; (ii) the construction of a full interchange at the intersection of the Expressway and New Jersey State Route 50; (iii) other capital improvements to the Expressway Project as shall be included in the Authority's 2007- 2011 capital plan, as the same may be amended; (iv) the payment of capitalized interest on a portion of the 2007 Notes; and (v) the payment of certain costs of issuance of the 2007 Notes (collectively, the "2007 Capital Projects"). See "CAPITAL PLAN" herein.

Any terms used as defined terms and not otherwise defined herein shall have the meanings ascribed thereto in APPENDIX B – "Copy of the Resolution" and APPENDIX C - "Copy of the 2007 Note Resolution" hereto.

Creation of Authority

The Authority was created in 1991 and operates, pursuant to the Act, as a public body corporate and politic and an instrumentality of the State of New Jersey ("State"). The Authority is authorized to function within the region encompassing the counties of Atlantic, Camden, Cape May, Cumberland, Gloucester and Salem (collectively, "South Jersey"). As described below, the Authority is, by operation of the Act, the successor to the New Jersey Expressway Authority ("Expressway Authority") and the Atlantic County Transportation Authority ("ACTA"). The purpose of the Authority is to coordinate South Jersey's Transportation System (as defined below) including addressing the highway network, aviation facilities and the transportation problems of Atlantic County. These goals are to be accomplished through the acquisition, construction, maintenance, operation and support of expressway projects including, without limitation, the Expressway, the acquisition, construction and maintenance of transportation projects including, without limitation, the expansion and improvement of the Airport (as hereinafter defined) and the operation of the ACTA facilities, and economic development facilities related to transportation projects authorized under the Act. On September 24, 1992, pursuant to the Act, the Authority acquired the Civil Terminal Area of the Atlantic City International Airport located in Egg Harbor, Hamilton and Galloway Townships in Atlantic County, New Jersey ("Airport"). The Authority established the Airport Division, as required by the Act, to operate and improve the Airport, subject to certain existing third-party contracts.

On October 1, 1992, ACTA was consolidated into the Authority in accordance with the Act. At that time, all property, assets, indebtedness and other obligations of ACTA and of the Parking Authority of the City of Atlantic City ("Atlantic City"), ACTA's predecessor, were transferred to and assumed by the Authority. The properties and programs transferred to the Authority in 1992 included the Expressway, ACTA's leasehold rights in the New York Avenue Parking Garage ("New York Avenue Parking Garage") located in Atlantic City and the bus management, tourist services and economic development program activities. The Authority purchased the New York Avenue Parking Garage in accordance with the terms of the New York Avenue Parking Garage lease with proceeds of the Authority's Transportation System Revenue Bonds, 1992 Series B (Tax Exempt), all of which were refunded with proceeds of the Authority's 1999 Bonds (as hereinafter defined) and 2003 Bonds (as hereinafter defined). The bus management, tourist services and economic development program activities are referred to herein as the "1992 Capital Projects."

On December 17, 1992, the Expressway Authority was merged into the Authority and the Expressway and the other property, assets, indebtedness and obligations of the Expressway Authority were transferred to and assumed by the Authority.

Authority Projects

The Act and the Resolution define and authorize the Authority to undertake Expressway Projects and Transportation Projects (collectively, "Projects"). See "AUTHORIZED PROJECTS" herein. The 2007 Capital Projects constitute Expressway Projects for purposes of the Resolution.

Key definitions under the Resolution include the following:

Expressway Project means the acquisition, construction and maintenance of the Expressway as transferred to the Authority pursuant to the Act and of any express highway, superhighway or motorway at the locations and between the termini as may hereafter be established by law and acquired or to be acquired or constructed or to be constructed under the provisions of the Act by the Authority, over which abutters have no easements or rights of light, air or direct access by reason of the fact that their properties abut thereon, and shall include but not be limited to all bridges, Parking Facilities, tunnels, overpasses, underpasses, interchanges, traffic circles, grade separations, entrance plazas, approaches, toll houses, service areas, stations and facilities, communications, facilities, administration, storage and other buildings, and other structures related to the use of the express highway, superhighway or motorway, intersecting highways and bridges and Feeder Roads which the Authority may deem necessary or desirable for the operation of the Project, together with all property rights, easements and interests which may be acquired by the Authority for the construction or the operation of the Project, and includes any planning necessary for the execution of any Expressway Project.

Parking Facility means any area or place, garage, building, or other improvement or structure for the parking or storage of motor or other vehicles, including but not limited to all real property and personal property, driveways, roads and other structures or areas necessary or useful or convenient for access to a facility from a public street, road or highway, or from any transportation project; meters, mechanical equipment necessary or useful or convenient for or in connection with that parking or storage; and any structures, buildings, space or accommodations, whether constructed by the Authority or by the lessee, to be leased for any business, commercial or other use, including the sale of gasoline or accessories for, or the repair or other servicing of automobiles and other motor vehicles, if, in the opinion of the Authority, the inclusion, provision and leasing is necessary to assist in defraying the expenses of the Authority and make

-2- possible the operation of the parking facility at reasonable rates, but the Authority shall not itself engage in the sale of gasoline or accessories for, or in the repair or other servicing of automobiles or other motor vehicles except in emergency, nor in the sale of any service or commodity of trade or commerce.

Public Transportation Facility means, in connection with Public Transportation Service, passenger stations, shelters and terminals, automobile and bus parking facilities, ramps, track connections, signal systems, power systems, information and communication systems, roadbeds, transit lanes or rights of way, equipment storage and servicing facilities, bridges, grade crossings, rail cars, locomotives, motorbuses and other motor vehicles, maintenance and garage facilities, revenue handling equipment and any other equipment, facility or property useful or related to the provision of transportation service.

Transportation Facility means any area, place, building or other structure designed to provide rail passenger service, motorbus regular route service, paratransit service, motorbus charter service, air passenger and air freight service, or marine passenger service, or any two or more of these services, to the public, and includes passenger stations, shelters and terminals, air passenger terminals, hangars, heliports, docking and launching facilities, parking facilities, ramps, track connections, signal systems, power systems, information and communication systems, roadbeds, transit lanes or rights of way, equipment storage and servicing facilities, bridges, grade crossings, rail cars, locomotives, motorbus and other motor vehicles, boats, ferries and other marine vehicles, aircraft, maintenance and garage facilities, revenue handling equipment and any other equipment, facility or property useful for or related to the provision of these services.

Transportation Project means the acquisition, construction, and maintenance of an airport, Public Transportation Facility or other Transportation Facility, established by the Act or which may be hereafter established by law and may include related facilities and activities which may consist of public transportation services, Public Transportation Facilities, including but not limited to rail and bus stations and terminals, noise abatement projects, Parking Facilities, Public Highways and Feeder Roads related to or connected with the project, and any economic development facilities as defined in the Act. Transportation Project includes any planning necessary to develop a comprehensive, efficient, convenient or economical transportation system in South Jersey, any planning or marketing necessary or desirable for the execution of any Transportation Project, and any planning, acquisition, construction or operation of Economic Development Facilities related to, connected with, or in the vicinity of the project.

The Projects undertaken by the Authority are either Pledged Projects or General Projects.

Pledged Projects are Projects that generate revenues sufficient to pay the Operating Expenses and Rehabilitation and Repair Requirements associated with such Projects. The Expressway Project and the 1992 Capital Projects were designated by the 1992 Bonds Series Resolution as Pledged Projects. The 2007 Capital Projects are designated pursuant to the 2007 Note Resolution as Pledged Projects.

General Projects are Projects that do not generate revenues sufficient to fully pay associated Operating Expenses and Rehabilitation and Repair Requirements. General Projects may become Pledged Projects if they meet certain net revenue tests. The Airport (including the Airport Parking Garage Project currently under construction and financed with the proceeds of the 2006 Bonds (as hereinafter defined)) and the New York Avenue Parking Garage are considered General Projects under the Resolution. The Authority expects that the revenues generated from the Airport Parking Garage Project will be sufficient to cover the operating expenses of the Airport Parking Garage Project.

See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES – General and Pledged Projects" herein.

-3- Special Projects are Projects undertaken by the Authority and financed under resolutions or other security instruments other than the Resolution. Special Projects are not part of the Transportation System. Holders of obligations issued to finance Special Projects have no claim on the Revenues pledged to secure the Bonds or on any of the Funds held under the Resolution. The revenues of Special Projects are not included in the Revenues of the Transportation System, and their operating expenses are not Operating Expenses under the Resolution or otherwise payable from Revenues. Any revenues of a Special Project in excess of its associated operating expenses, debt service and reserve requirements are, by the terms of the Resolution, to be credited to the General Reserve Fund. The Airport operations building owned by the Authority and leased to Raytheon Aircraft Services, Inc. is a Special Project.

The Authority may redesignate a Pledged Project or a General Project to be a Special Project if the Authority demonstrates that it would not have breached its rate covenant in the preceding Fiscal Year had such redesignation occurred in such preceding Fiscal Year. Upon such redesignation, the revenues therefrom would no longer be Revenues pledged to the Bonds and the operating expenses thereof would no longer be Operating Expenses payable from Revenues. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES – General and Pledged Projects" herein.

Transportation System

The "Transportation System" is comprised of Public Highways, Expressway Projects, Transportation Projects, and all other methods of transportation for the movement of people and goods in South Jersey. Expressway Projects and Transportation Projects can be one of two types – Pledged Projects or General Projects. Under the Resolution, the Revenues of both Pledged Projects and General Projects (other than Airport Revenues) are pledged on a senior lien basis to secure the payment of the Bonds and Qualified Swap Obligations, if any, but the Operating Expenses of only Pledged Projects are payable prior to Debt Service on the Bonds and Qualified Swap Obligations, if any. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES - Pledge of Net Revenues and Funds" herein. Pursuant to the Resolution, Airport Revenues are excluded from the definition of Revenues and are not pledged to the Bonds and Qualified Swap Obligations, if any. Instead, Airport Revenues are to be applied to the payment of Airport Costs and Expenses, including Debt Service on any Airport Bonds. The excess, if any, of Airport Costs and Expenses over Airport Revenues ("Airport Subsidy") is payable from amounts on deposit in the General Reserve Fund as a General Project Operating Expense. "Airport Revenues" include all receipts, revenues, income and other moneys received or receivable by or on behalf of the Authority from or in connection with the ownership or operation of or use of or privileges at the Airport. "Airport Costs and Expenses" include all Operating Expenses and Costs charged to the Airport in accordance with the Authority’s accounting practices and include Debt Service on any Airport Bonds issued under the Resolution, reimbursements to the Authority for amounts provided by the Authority, whether as a loan or contribution, to pay any other Airport Costs and Expenses, and any and all other costs and expenses of the Authority for the payment or reimbursement of which Airport Revenues may be applied, all subject to applicable law. The 2006 Bonds which financed construction of the Airport Parking Garage Project are secured by Airport Revenues pursuant to the Resolution.

The Transportation System encompasses the Expressway Project, including the Expressway, Public Highways and Transportation Projects, including the Airport, the ACTA facilities and functions, other Public Transportation Facilities and related Economic Development Facilities located in South Jersey.

Expressway Project. One major component of the Transportation System is the Expressway, which is a limited-access toll road, 46.4 miles long, extending from approximately 10 miles east of Philadelphia, Pennsylvania to Atlantic City, New Jersey. Fourteen interchanges provide access to major arterial routes, including the Garden State Parkway, and nine toll plazas control the collection of toll revenues. The Expressway opened for traffic in stages in 1964 and 1965, with an additional one-half mile section added in 1997 and finally the Atlantic City/Brigantine Connector ("Connector") added in 2001.

-4- The improvements to the Atlantic Avenue Surface Parking Lot were designated as part of the Expressway Project. See "ATLANTIC CITY EXPRESSWAY" herein.

The Atlantic City/Brigantine Connector. In July 2001, the Authority completed the construction of the Connector between the Expressway and Brigantine Boulevard in Atlantic City. The Connector is part of the Expressway. In connection with the Authority’s undertaking the Connector, the Authority, Mirage Resorts, Incorporated ("Mirage") and affiliates, the State and the Casino Reinvestment Development Authority ("CRDA") entered into a series of agreements regarding the planning, permitting, design, construction and financing of this extension of the Expressway. See "ATLANTIC CITY/BRIGANTINE CONNECTOR - CRDA Agreements" herein.

Airport. Another major component of the Transportation System is the Airport, which covers approximately 5,000 acres and is located off the Delilah Road exit, Interchange 9, of the Expressway, approximately ten (10) miles northwest of Atlantic City. The Airport’s aviation services include scheduled air service and charter service as well as ground handling of aircraft, fueling, aircraft maintenance, parking, registration and collection of landing and parking fees through fixed-based operators. Pursuant to the Series Resolution which authorized the 2006 Bonds which were issued in January, 2006, the Authority is currently constructing a multi-level parking garage containing approximately 1,400 parking spaces and including installation of a fare collection system capable of accepting EZ-Pass® as a method of payment in front of the passenger terminal at the Airport. The 2006 Bonds used to finance the Airport Parking Garage Project constitute "Airport Bonds" under the Resolution. Since the Airport Parking Garage Project is related to the Airport, such project is considered a General Project under the Resolution. See "AIRPORT" herein. The Authority expects that the revenues generated from the Airport Parking Garage Project, upon completion of construction and commencement of operations, will be sufficient to cover the operating expenses of the Airport Parking Garage Project.

Parking Projects. A fourth component of the Transportation System are Projects for Parking Facilities. The New York Avenue Parking Garage, formerly operated by ACTA, is such a Project. The New York Avenue Parking Garage has six levels and contains 825 parking spaces for cars. The New York Avenue Parking Garage also contains approximately 13,800 square feet of leasable office and retail space. See "TRANSPORTATION PROJECTS - Facilities - New York Avenue Parking Garage" herein.

Bus Management Projects. A final component of the Transportation System is the management, control and regulation of certain motorbus regular route and motorbus charter services for which the Authority is authorized to impose a reasonable service charge. See "TRANSPORTATION PROJECTS - Facilities - Bus Management" herein.

The detailed definitions of each type of Project and of the Transportation System are set forth in APPENDIX B - "Copy of the Resolution", to which reference should be made.

The Revenues of the Transportation System, subject to payment of Operating Expenses of Pledged Projects, are pledged on a senior lien basis to secure the payment of Bonds issued under the Resolution and Qualified Swap Obligations, if any. Subordinated Indebtedness issued pursuant to the provisions of the Resolution are not Bonds, and are secured solely by amounts in the Subordinated Debt Fund and the General Reserve Fund, subject to the provisions of the Resolution requiring prior application of amounts in such Funds to other purposes, including, but not limited to, the payment of Debt Service on Bonds and Qualified Swap Obligations, if any. THE 2007 NOTES ARE SUBORDINATED INDEBTEDNESS WITHIN THE MEANING OF THE RESOLUTION. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES - Subordination" herein.

The Resolution also makes reference to Special Projects, which are Projects whose revenues are not included in the Revenues of the Transportation System and whose operating expenses are not payable from Revenues. Any Special Projects undertaken or to be undertaken by the Authority are financed or to

-5- be financed under other resolutions of the Authority and do not form part of the Transportation System. Holders of obligations issued to finance Special Projects have no claim on the Revenues pledged to secure the Bonds and Qualified Swap Obligations, if any, or on any of the funds held under the Resolution.

Senior Lien Indebtedness

Outstanding Bonds issued pursuant to the Resolution are payable from and secured by a lien on and pledge of the Authority’s Revenues derived from its Transportation System including revenues derived from the Airport, subject to payment of Operating Expenses of Pledged Projects. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES – Pledge of Net Revenues and Funds" herein.

Under the Resolution, the Authority may issue Additional Bonds and enter into Swap Agreements and certain other credit facilities supporting payment of Bonds on a parity with the Outstanding Bonds. The Authority may also incur indebtedness in the form of Variable Rate Debt, Demand Obligations and Commercial Paper. All such forms of indebtedness may be issued as Additional Bonds or as Subordinated Indebtedness, subordinate to the pledge of Revenues to the payment of the Bonds and Qualified Swap Obligations, if any. See " – Subordinated Indebtedness" below and "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES" herein.

The Authority has previously issued its Transportation System Revenue Bonds, 1999 Series on June 2, 1999 and currently Outstanding in the aggregate principal amount of $192,485,000 ("1999 Bonds"), Transportation System Revenue Refunding Bonds, 2003 Series on April 23, 2003 and currently Outstanding in the aggregate principal amount of $11,765,000 ("2003 Bonds"), Transportation System Revenue Bonds, 2004 Series A Bonds on June 24, 2004 and currently Outstanding in the aggregate principal amount of $21,260,000 ("2004 Bonds"), and Transportation System Revenue Bonds, 2006 Series A on January 12, 2006 and currently Outstanding in the aggregate principal amount of $50,365,000 ("2006 Bonds" and together with the 1999 Bonds, the 2003 Bonds and the 2004 Bonds, the "Outstanding Bonds").

Subordinated Indebtedness

Subordinated Indebtedness issued pursuant to the provisions of the Resolution is secured solely by amounts in the Subordinated Debt Fund and the General Reserve Fund, subject to the provisions of the Resolution requiring prior application of amounts in such Funds to other purposes, including, but not limited to, the payment of Debt Service on Bonds issued under the Resolution and Qualified Swap Obligations, if any. The 2007 Notes are issued as Subordinated Indebtedness.

The 2007 Notes will be payable from and secured by a lien on and pledge of all moneys and securities from time to time on deposit in the Subordinated Debt Fund and the General Reserve Fund held by The Bank of New York, West Paterson, New Jersey ("Bond Trustee") under the Resolution. The lien on and pledge of the moneys and securities in the Subordinated Debt Fund and the General Reserve Fund securing the 2007 Notes shall be subordinate in all respects to the provisions of the Resolution and the lien and pledge created by the Resolution in favor of all Bonds issued thereunder (which does not include "Subordinated Indebtedness" as defined in the Resolution) and Qualified Swap Obligations, if any.

The Authority may issue bonds, notes or other obligations payable out of and secured by a pledge of or other lien or charge on the amounts on deposit in the Subordinated Debt Fund or the General Reserve Fund while the 2007 Notes are outstanding, subject to compliance with the provisions of the Resolution relating to the issuance of Subordinated Indebtedness. The Authority has agreed in the 2007 Note Resolution that it shall not issue any additional Series of Bonds pursuant to the Resolution, other than Refunding Bonds to refund Outstanding Bonds or Subordinated Indebtedness; provided, however, that if Refunding Bonds are issued to refinance Subordinated Indebtedness, such Refunding Bonds are

-6- issued to retire all outstanding Subordinated Indebtedness including the 2007 Notes. NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED IN THE 2007 NOTE RESOLUTION SHALL BE CONSTRUED AS LIMITING ANY AUTHORITY GRANTED TO THE AUTHORITY IN THE RESOLUTION TO ISSUE BONDS THEREUNDER WHICH SHALL BE SECURED BY THE PLEDGE OF THE REVENUES, INCLUDING AMOUNTS FROM TIME TO TIME ON DEPOSIT IN THE SUBORDINATED DEBT FUND AND IN THE GENERAL RESERVE FUND, ON A PARITY WITH ALL OTHER BONDS ISSUED THEREUNDER, AND WHICH SHALL BE SENIOR AND SUPERIOR IN PRIORITY TO THE OBLIGATIONS OF THE AUTHORITY UNDER THE 2007 NOTES, IF SUCH BONDS ARE ISSUED TO RETIRE THE 2007 NOTES OR IN SUBSTITUTION FOR THE 2007 NOTES IN WHOLE OR IN PART. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES" herein.

The Authority is issuing the 2007 Notes in anticipation of the issuance by the Authority of a Series of Bonds pursuant to the Resolution, the proceeds of which, if and when issued, shall be applied to the repayment of the principal of and accrued and unpaid interest on the 2007 Notes. Pursuant to the provisions of the Act, Bonds may not be issued by the Authority without the prior written approval of the Governor of the State and either the State Treasurer or the Director of the Division of Budget and Accounting in the State Department of the Treasury. See "THE AUTHORITY – Powers of the Authority; State Oversight" herein. There can be no assurance at this time that such Series of Bonds will be issued.

As of the date of issuance of the 2007 Notes, there will be no outstanding notes, bonds or other evidences of indebtedness, including Qualified Swap Agreements, under the Resolution other than the Authority's 1999 Bonds, 2003 Bonds, 2004 Bonds and 2006 Bonds which are secured by Net Revenues of the Transportation System or the amounts on deposit from time to time in the Funds and Accounts established pursuant to the Resolution. The Outstanding Bonds and Qualified Swap Obligations, if any, are equally and ratably secured under the Resolution and are senior and superior in priority to the obligations of the Authority under the 2007 Notes. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES – Other Forms of Obligations; Subordinated Indebtedness; Revenue Anticipation Notes" herein for a discussion of certain Swaptions (as hereinafter defined) entered into by the Authority in connection with a portion of the 1999 Bonds.

Special Revenue Bonds

In connection with the Connector, the Authority issued and sold to Mirage (now MGM/Mirage) or its designee $54,999,360 in aggregate initial issuance amount of Special Revenue Bonds (Atlantic City/Brigantine Connector Project - CRDA H-Tract Revenue Pledge Agreement) ("Special Revenue Bonds") in five series as funds were needed to pay a portion of the developer’s share of the cost of the Connector. As of January 1, 2005, the Special Revenue Bonds had converted to accrue, rather than accrete, interest and the accreted value $65,890,000. The Special Revenue Bonds are payable from amounts received by the Authority from CRDA pursuant to the Pledge Agreement, dated October 10, 1997 ("CRDA Pledge Agreement"), between the Authority and CRDA. The amounts payable by CRDA under the CRDA Pledge Agreement ("Special Revenues") are Governmental Grants which do not constitute Revenues under the Resolution, and the Special Revenue Bonds are not payable from or secured by such Revenues. See "ATLANTIC CITY/BRIGANTINE CONNECTOR - CRDA Agreements" herein.

STATE OF NEW JERSEY ASSET EVALUATION PROGRAM

The Treasurer of the State ("Treasurer") has identified certain assets ("Assets") of the State and/or its independent authorities (including, but not limited to, the Authority) which potentially have significant realizable value to the State and has established an Asset Evaluation Program ("Program") to evaluate these Assets. The State anticipates that the Program will be implemented in three phases. Phase 1 consisted of an asset/liability study, substantive analysis of the Assets and an analysis of various options

-7- for the monetization of these Assets. Phase 2 of the Program, which is currently in progress, consists of a more detailed due diligence analysis, financial valuation and transaction structuring of some of the options which were the product of Phase 1. Upon completion of Phase 2 the State will, in its sole discretion, determine whether to proceed with one or more of these options. In the event that the State decides to proceed with one or more of these options, Phase 3 will consist of executing the chosen transaction(s). To assist the State in the Program, the Treasurer, through a competitive RFP/RFQ process, selected UBS Securities LLC to serve as financial advisor ("Advisor").

On November 15, 2006, the Advisor issued its report entitled "State of New Jersey Asset Evaluation Program Phase 1 Report" ("Report"). The Report contained a review of various Assets and grouped the Assets by sector and class ("Asset Class"). The Report identified those Asset Classes and Assets that (i) are most commercially viable from a feasibility and market-readiness perspective and (ii) represent the most potentially meaningful, realizable value to the State as candidates for a public-private partnership. The Report also preliminarily assessed various transaction structures, financial benefits and risks, potential social and policy impacts and use of proceeds application strategies as may be related to each Asset.

The Report divided the pool of Assets into tier groups based on recommended further action according to feasibility and valuation as follows:

x Tier 1 – Assets having sound commercial viability and high valuation potential; those likely to be the preferred candidate for near-term public-private partnerships; x Tier 2 – Assets that appear to be promising candidates but for which additional information is required before a more definitive assessment may be made; x Tier 3 – Assets that are considered lower value candidates but that may benefit from private participation to reduce ongoing required State financial support; and x Tier 4 – Assets that are not deemed suitable at this time but may be candidates for later investigation or action.

The Report classified the Atlantic City Expressway and the Atlantic City International Airport, both of which are owned by the Authority, as Tier 1 Assets.

The State's response to the Report and its determination as to whether to proceed to Phase 3 has not yet been made. There can be no assurance that the State will not proceed to Phase 3 of the Program or, if the State does so proceed, that the Assets owned by the Authority will not be impacted. If the State does proceed, any action taken will be taken in accordance with the provisions of the Act regarding the pledge of the State to holders of Bonds or Subordinated Indebtedness issued by the Authority. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES - State Agreements With Bondholders" herein.

PLAN OF FINANCING

The 2007 Capital Projects

The proceeds of the 2007 Notes shall be deposited into the Project Fund created under the 2007 Note Resolution and used to pay the costs of the 2007 Capital Projects. See "ESTIMATED SOURCES AND USES OF FUNDS" herein. Pursuant to the 2007 Note Resolution, the 2007 Capital Projects constitute Expressway Projects. The Authority presently intends and expects to issue a Series of Refunding Bonds and to apply the proceeds thereof to retire the 2007 Notes on or before the maturity date thereof. The Authority has agreed in the 2007 Note Resolution that, in the event such Series of Refunding Bonds is issued, it will first apply the proceeds of such Series of Refunding Bonds to the payment of the 2007 Notes. There can be no assurance at this time, however, that such Series of Refunding Bonds will be issued.

-8- ESTIMATED SOURCES AND USES OF FUNDS

The following are the estimated sources and uses of funds for the 2007 Notes:

Estimated Sources:

Par Amount of 2007 Notes $22,390,000.00 Original Issue Discount (51,497.00)

Total Sources $22,338,503.00

Estimated Uses:

Deposit to Project Fund1 $22,245,422.65 Underwriter's Discount 93,080.35

Total Uses $22,338,503.00 ______1 Includes capitalized interest on a portion of the 2007 Notes as well as amounts for the payment of legal, accounting, printing, ratings, bond insurance premium and other costs of issuance.

THE 2007 NOTES

General

The Act, the Resolution and the 2007 Note Resolution and all of the provisions thereof are incorporated by reference in the text of the 2007 Notes, and the 2007 Notes also provide that each registered and beneficial owner ("Beneficial Owner") thereof by acceptance of such 2007 Note (including receipt of a book-entry credit evidencing an interest therein) assents to all of such provisions as an explicit and material portion of the consideration running to the Authority to induce it to adopt the 2007 Note Resolution, and to issue such 2007 Notes. Copies of the Act and the 2007 Note Resolution, including the full text of the form of the 2007 Notes, are available for inspection and copying at the corporate trust office of The Bank of New York ("Paying Agent") in West Paterson, New Jersey.

The following is only a summary of certain provisions of the 2007 Notes. Reference is made to the Act and the 2007 Note Resolution, including the form of 2007 Notes annexed thereto, for the complete statement of the terms of the 2007 Notes. See APPENDIX B - "Copy of the Resolution" and APPENDIX C - "Copy of the 2007 Note Resolution" hereto. The following description is qualified in its entirety by reference thereto.

Certain Dates and Payment Terms

The 2007 Notes will be dated the date of initial issuance and delivery thereof, will bear interest at the rate of 5.50%, and will mature on January 1, 2010. Interest on the 2007 Notes is payable initially on January 1, 2008 and semi-annually thereafter on July 1 and January 1 until maturity or earlier redemption or acceleration thereof; provided, however, that the 2007 Notes may not be accelerated unless the Bonds issued under the Resolution are accelerated. Interest shall be calculated on the basis of a year of 360 days consisting of twelve 30-day months. Principal or redemption price of the 2007 Notes will be paid, when due, upon presentation and surrender of the 2007 Notes at the corporate trust office of the Paying Agent.

The 2007 Notes initially will be issued as one fully registered note, in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York ("DTC"). Beneficial ownership in the 2007 Notes may be acquired or transferred only through book entries made

-9- on the records of DTC and its participants in the principal amount of $5,000 or integral multiples thereof. See "THE 2007 NOTES - Book-Entry-Only System" herein. As long as DTC or its nominee, Cede & Co., is the registered owner of the 2007 Notes, payments of principal or redemption price of and interest on the 2007 Notes will be made only to Cede & Co. by the Paying Agent on behalf of the Authority.

Redemption

The 2007 Notes are subject to redemption at the option of the Authority, in whole but not in part, at any time on or after January 1, 2008, at a redemption price equal to the principal amount thereof, without premium, plus accrued interest to the redemption date.

Notice of the call for redemption shall be given by the Paying Agent (on behalf of the Authority) by mailing a copy of the redemption notice by registered or certified mail at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption to the Holder of each 2007 Note to be redeemed at the address shown on the registration books of the Paying Agent, as note registrar.

Notice having been given in the manner provided in the 2007 Note Resolution, the 2007 Notes will be due and payable on the redemption date so designated at a redemption price equal to the principal amount thereof, without premium, plus interest accrued and unpaid to the redemption date, upon presentation and surrender thereof at the office specified in such notice. If, on the redemption date, moneys for the redemption of all the 2007 Notes, together with interest to the redemption date, shall be held by the Paying Agent so as to be available therefor on said date and, if notice of redemption shall have been given as aforesaid, then, from and after the redemption date, interest on the 2007 Notes will cease to accrue and become payable. If said moneys shall not be so available on the redemption date, the 2007 Notes will continue to bear interest until paid at the same rate as they would have borne had they not been called for redemption.

If at the time of mailing of any notice of redemption the Authority shall not have deposited with the Bond Trustee moneys sufficient to redeem all the 2007 Notes called for redemption, such notice shall state that it is subject to the deposit of the redemption moneys with the Bond Trustee not later than the opening of business on the redemption date and shall be of no effect unless such moneys are so deposited.

Book-Entry-Only System

The description which follows of the procedures and record keeping with respect to beneficial ownership interests in the 2007 Notes, payment of principal and interest, and other payments on the 2007 Notes to Direct Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the 2007 Notes and other related transactions by and between DTC, Direct Participants and Beneficial Owners, is based on certain information furnished by DTC to the Authority. Accordingly, the Authority does not make any representations as to the completeness or accuracy of such information.

DTC will act as securities depository for the 2007 Notes. The 2007 Notes will be issued as fully- registered notes registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered 2007 Note certificate will be issued for the 2007 Notes, in the aggregate principal amount of the issue, and will be deposited with DTC.

DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market

-10- instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation ("NSCC"), Fixed Income Clearing Corporation ("FICC") and Emerging Markets Clearing Corporation ("EMCC") (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. So long as the 2007 Notes are maintained in book-entry form with DTC, the following procedures will be applicable with respect to the 2007 Notes.

Purchases of the 2007 Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2007 Notes on DTC's records. The ownership interest of each actual purchaser of the 2007 Notes ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2007 Notes are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2007 Notes, except in the event that use of the book-entry system for the 2007 Notes is discontinued.

To facilitate subsequent transfers, all 2007 Notes deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the 2007 Notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2007 Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts the 2007 Notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the 2007 Notes unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority or its designated paying agent as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the 2007 Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).

-11- Payments of principal and interest with respect to the 2007 Notes will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the Authority or its designated paying agent on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such Participant and not of DTC (nor its nominee) or the Authority or its designated paying agent subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest with respect to the 2007 Notes to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or its designated paying agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the 2007 Notes at any time by giving reasonable notice to the Authority or its designated paying agent. Under such circumstances, in the event that a successor securities depository is not obtained, 2007 Note certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, 2007 Note certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof.

SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE 2007 NOTES, AS NOMINEE OF DTC, REFERENCES HEREIN TO 2007 NOTEHOLDERS OR REGISTERED OWNERS OF THE 2007 NOTES SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE 2007 NOTES.

THE AUTHORITY AND THE PAYING AGENT CANNOT AND DO NOT GIVE ANY ASSURANCES THAT THE DTC PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE 2007 NOTES (i) PAYMENTS OF PRINCIPAL OF OR INTEREST AND PREMIUM, IF ANY, ON THE 2007 NOTES; (ii) CERTIFICATES REPRESENTING AN OWNERSHIP INTEREST OR OTHER CONFIRMATION OF BENEFICIAL OWNERSHIP INTERESTS IN 2007 NOTES, OR (iii) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNER OF THE 2007 NOTES, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DTC PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT "RULES" APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE CURRENT "PROCEDURES" OF DTC TO BE FOLLOWED IN DEALING WITH DTC PARTICIPANTS ARE ON FILE WITH DTC.

NEITHER THE AUTHORITY NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO SUCH DTC PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (2) THE PAYMENT BY ANY DTC PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OR REDEMPTION PRICE OF OR INTEREST ON THE 2007 NOTES; (3) THE DELIVERY BY ANY DTC PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS

-12- REQUIRED OR PERMITTED UNDER THE TERMS OF THE 2007 NOTE RESOLUTION TO BE GIVEN TO NOTEHOLDERS; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS NOTEHOLDER.

Discontinuance of Book-Entry-Only System

DTC may determine to discontinue providing it service with respect to the 2007 Notes at any time by giving notice to the Authority and discharging its responsibilities with respect thereto under applicable law or the Authority may determine to discontinue the system of book-entry-only transfers through DTC (or a successor securities depository). Under such circumstances, 2007 Note certificates will be authenticated and delivered as provided in the 2007 Note Resolution to the Beneficial Owners of the 2007 Notes, who shall then become the registered owners thereof.

If the book-entry-only system is discontinued and the Beneficial Owners become registered owners of the 2007 Notes, the Authority shall immediately advise the Bond Trustee in wiring of the procedures for transfer of the 2007 Notes from book-entry-only form to a fully registered form.

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the 2007 Notes, Financial Security Assurance Inc. ("Financial Security" or "Bond Insurer") will issue its Municipal Bond Insurance Policy for the 2007 Notes ("Policy"). The Policy guarantees the scheduled payment of principal of and interest on the 2007 Notes when due as set forth in the form of the Policy included as APPENDIX G to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Financial Security Assurance Inc.

Financial Security is a New York domiciled financial guaranty insurance company and a wholly owned subsidiary of Financial Security Assurance Holdings Ltd. ("Holdings"). Holdings is an indirect subsidiary of Dexia, S.A., a publicly held Belgian corporation, and of Dexia Credit Local, a direct wholly- owned subsidiary of Dexia, S.A. Dexia, S.A., through its bank subsidiaries, is primarily engaged in the business of public finance, banking and asset management in France, Belgium and other European countries. No shareholder of Holdings or Financial Security is liable for the obligations of Financial Security.

At March 31, 2007, Financial Security's combined policyholders' surplus and contingency reserves were approximately $2,601,527,000 and its total net unearned premium reserve was approximately $2,089,989,000 in accordance with statutory accounting principles. At March 31, 2007, Financial Security's consolidated shareholder’s equity was approximately $2,753,483,000 and its total net unearned premium reserve was approximately $1,649,524,000 in accordance with generally accepted accounting principles.

The consolidated financial statements of Financial Security included in, or as exhibits to, the annual and quarterly reports filed after December 31, 2005 by Holdings with the Securities and Exchange Commission are hereby incorporated by reference into this Official Statement. All financial statements of Financial Security included in, or as exhibits to, documents filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this Official Statement and before the termination of the offering of the 2007 Notes shall be deemed incorporated by reference into

-13- this Official Statement. Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance Inc.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 826-0100).

The Policy does not protect investors against changes in market value of the 2007 Notes, which market value may be impaired as a result of changes in prevailing interest rates, changes in applicable ratings or other causes. Financial Security makes no representation regarding the 2007 Notes or the advisability of investing in the 2007 Notes. Financial Security makes no representation regarding the Official Statement, nor has it participated in the preparation thereof, except that Financial Security has provided to the Authority the information presented under this caption for inclusion in this Official Statement.

SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES

Set forth below are brief descriptions of various terms and provisions of the Resolution relating to the superior lien and pledge created by the Resolution in favor of Bonds and Qualified Swap Obligations, if any; the 2007 Note Resolution relating to the security for the 2007 Notes which constitute "Subordinated Indebtedness" for purposes of the Resolution; and the covenants of the Authority with respect to the Funds established under the Resolution and the 2007 Note Resolution, and the maintenance thereof, the setting of rates and charges, and various other matters set forth in the Resolution, the 2007 Note Resolution and the Act. Such descriptions are qualified in their entirety by reference to the complete texts of the Resolution, the 2007 Note Resolution and the Act, copies of which are on file at the corporate trust office of the Paying Agent in West Paterson, New Jersey. Capitalized terms used herein and not defined below or elsewhere in this Official Statement shall have the meanings ascribed thereto in APPENDIX B - "Copy of the Resolution" and APPENDIX C - "Copy of the 2007 Note Resolution" hereto, respectively. This section of the Official Statement should be read in conjunction with APPENDIX B - "Copy of the Resolution" and APPENDIX C - "Copy of the 2007 Note Resolution" hereto.

General

The Resolution provides that, subject to the prior payment of Operating Expenses of Pledged Projects, Bonds (including the Outstanding Bonds) and Qualified Swap Obligations, if any, are equally and ratably secured by the pledge of Revenues, all Scheduled Counterparty Payments and all moneys, securities and funds held or set aside or to be held or set aside by any fiduciary or in any Funds or Accounts created by the Resolution and described below (except the Rebate Fund and the Airport Revenue Fund, which may pay only Debt Service on any Airport Bonds and other Airport Costs and Expenses), and are senior in lien and claim to payment of all other debt obligations issued by the Authority under the Resolution, except for revenue anticipation notes, which shall have a priority in the Fiscal Year in which such notes are issued. The 2006 Bonds which funded the Airport Parking Garage Project have been designated as "Airport Bonds" under the Resolution.

Pledge Effected by the 2007 Note Resolution

The 2007 Notes are special, limited obligations of the Authority payable solely from the following sources: (i) from the proceeds of a Series of Bonds, if any, issued to refinance the 2007 Notes; (ii) from the moneys and securities from time to time transferred from the Project Fund to the Subordinated Debt Fund, and (iii) from the moneys and securities from time to time on deposit in the Subordinated Debt Fund and the General Reserve Fund pursuant to the terms of the Resolution and subject to Section 5.12(a) of the Resolution. Section 5.12(a) of the Resolution requires that amounts in the General Reserve Fund be distributed into certain Funds in a certain order of priority, some of which will be prior to deposits of amounts into the Subordinated Debt Fund. See "SOURCES OF PAYMENT

-14- AND SECURITY FOR THE 2007 NOTES - Flow of Funds" herein. The Authority has pledged and assigned as security for the payment of the Obligations of the Authority under the 2007 Notes, in accordance with the terms and provisions of the 2007 Notes and the 2007 Note Resolution, all of the moneys and securities from time to time on deposit in the Subordinated Debt Fund and the General Reserve Fund subject only to Section 5.12(a) of the Resolution and pursuant to the terms of the Resolution. The Obligations of the Authority under the 2007 Notes, to the extent payable from moneys and securities from time to time on deposit in the Subordinated Debt Fund and the General Reserve Fund, shall also be pari passu and on a parity with other Subordinated Indebtedness issued from time to time by the Authority, payments required to be made by the Authority under any Exchange Agreements and amounts due and payable by the Authority under the terms of any Qualified Swap Agreement as a result of early termination thereof.

THE 2007 NOTES ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE PROPERTY PLEDGED TO THE PAYMENT OF THE 2007 NOTES AS CONTAINED IN THE 2007 NOTE RESOLUTION, AND NEITHER THE STATE OF NEW JERSEY NOR ANY INSTRUMENTALITY THEREOF, OTHER THAN THE AUTHORITY (TO THE LIMITED EXTENT SET FORTH IN THE 2007 NOTE RESOLUTION), IS OBLIGATED TO PAY THE 2007 NOTES, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NEW JERSEY OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2007 NOTES. THE AUTHORITY HAS NO TAXING POWER.

Subordination

The 2007 Notes are subordinate in all respects to the provisions of the Resolution and the lien and pledge created by the Resolution in favor of the Bonds and Qualified Swap Obligations, if any.

All Principal Installments and interest on the Bonds and all Qualified Swap Obligations must be paid before any further payment of principal of or interest on the 2007 Notes, if any of the following events occur:

(a) An Event of Default under the Resolution resulting from the non-payment of Principal Installments or interest on the Bonds (until cured).

(b) An Event of Default under the Resolution with respect to any one or more Series of Bonds resulting in an acceleration of Principal Installments and interest thereon.

(c) The Authority becomes insolvent.

Any Event of Default with respect to the 2007 Notes shall not in itself create the right to declare an Event of Default under the Resolution. The 2007 Note Resolution provides that the 2007 Notes may not be accelerated unless the Bonds are accelerated.

Pledge of Net Revenues and Funds

The "Revenues" pledged to the Bonds and Qualified Swap Obligations, if any, generally consist of all receipts, revenues, income and other moneys received or receivable by or on behalf of the Authority from or in connection with the ownership or the operation of the or use of or privileges at the Transportation System (other than Special Projects) situated throughout South Jersey, including specified earnings thereon, but excluding Government Grants and Loans, Airport Revenues, any other sums which by the conditions for receipt thereof or otherwise under applicable law or regulation are not available to be applied generally as "Revenues" and the proceeds of any borrowing (or refinancing thereof) received by the Authority for the purpose of defraying the Cost of any Project or any Scheduled Counterparty Payments or other amounts received by the Authority under the terms of any Qualified Swap Agreement or Exchange Agreement. For a complete definition of "Revenues", see APPENDIX B - "Copy of the

-15- Resolution" hereto. This pledge of Revenues is subject to the right of the Authority to apply Revenues for Operating Expenses of Pledged Projects as provided in the Resolution.

The "Airport Revenues" pledged to the Airport Bonds generally consist of all receipts, revenues, income and other moneys received or receivable by or on behalf of the Authority from or in connection with the ownership or the operation of the or use of or privileges at the Airport (other than Special Projects), including specified earnings thereon. For a complete definition of "Airport Revenues", see APPENDIX B - "Copy of the Resolution" hereto. All of the 2006 Bonds were issued as "Airport Bonds" pursuant to the Resolution.

The Authority and CRDA have entered into the Parking Fee Agreement dated October 10, 1997 ("Parking Fee Agreement"), as amended, pursuant to which a portion of certain statutory parking fees receivable by CRDA from new hotels and casinos developed in the Marina District in Atlantic City ("Marina Parking Fees") are payable to the Authority. The maximum amount payable by CRDA under the Parking Fee Agreement is an amount sufficient to amortize $67,566,510 principal amount of the 1999 Bonds issued to finance the Connector. See "ATLANTIC CITY/BRIGANTINE CONNECTOR – CRDA Agreements" herein.

The 2007 Note Resolution provides that all moneys and securities from time to time on deposit in the Subordinated Debt Fund and the General Reserve Fund shall be subject to the lien of the pledge created by the 2007 Note Resolution in favor of the holders of the 2007 Notes.

Flow of Funds

Revenues. Pursuant to the Resolution, all Revenues and Scheduled Counterparty Payments, including any other moneys received by the Authority for operating, maintaining or repairing the Transportation System, other than Airport Revenues, collected by the Authority will be deposited daily in the name of the Bond Trustee with a depositary or depositaries designated by the Authority which shall receive the deposits as custodian thereof for the Bond Trustee and shall be credited by the Bond Trustee to the Revenue Fund. Statements showing the name of the depositary and amount of deposit shall be promptly provided to the Bond Trustee by the Authority and such depositary. So long as no Event of Default exists or is continuing, the Authority may issue written instructions to the Bond Trustee directing the Bond Trustee to transfer from time to time moneys on deposit in the Revenue Fund to accounts maintained at financial institutions which meet the qualifications for Paying Agents provided such accounts are in the joint names of the Authority and the Bond Trustee. The Authority may draw upon any such accounts only for purposes of paying Operating Expenses of Pledged Projects in amounts authorized by the Act, the then-current Annual Budget of the Authority or as permitted by the Resolution and any Series Resolution or Supplemental Resolution.

Within the first ten (10) days of each calendar month in each Fiscal Year, the Bond Trustee, after retaining an amount equal to fifteen percent (15%) of the annual Operating Expenses of each Authority Operating Division or Pledged Project as set forth in the Authority's then-current Annual Budget, will make payments into the following Funds in the following order of priority provided maximum payment has been received by each Fund of higher priority:

First: Debt Service Fund, to the extent (if any) needed to increase the amount in the Debt Service Fund (including the amount in any Sinking Fund Account established therein) so that it equals the sum of (i) a pro rata portion of the Debt Service Requirements for the Bonds in respect of the next Payment Date for the Bonds and (ii) any Debt Service on Qualified Swap Obligations due and owing by the Authority on the next Payment Date.

Second: Debt Service Reserve Fund: (i) to the extent (if any) needed to increase the amount in the Debt Service Reserve Fund so that over the course of six (6) calendar months after any draw thereon, it equals the Debt Service Reserve Requirement, through equal monthly repayments; and (ii) after any

-16- valuation of the Debt Service Reserve Fund, to the extent (if any) necessary to increase the amount in the Debt Service Reserve Fund so that it equals the Debt Service Reserve Requirement. Any prepayments of amounts required under clause (i) of this paragraph shall be credited to the remaining installment requirements in reverse order. In lieu of the deposits required under clause (i) of this paragraph, amounts shall be payable as required pursuant to the reimbursement agreement associated with any Credit Facility or surety policy at the time being employed to satisfy the Debt Service Reserve Requirement, in order to reinstate the same to an amount equal to the Debt Service Reserve Requirement within the aforesaid six- (6-) month period.

Third: Accounts in the Rehabilitation and Repair Fund, to the extent (if any) needed to increase the amounts in the various Operating Division Accounts in the Rehabilitation and Repair Fund so that each equals a pro rata portion of the Rehabilitation and Repair Requirement for the then-current Fiscal Year for each Authority Operating Division.

Fourth: Subordinated Debt Fund, to the extent (if any) needed to increase the amount in the Subordinated Debt Fund so that it equals a pro rata portion of the Subordinated Debt Obligations (other than Subordinated Debt Obligations to be paid from sources other than Revenues) coming due on the next payment date for each issue of Subordinated Indebtedness then outstanding, as such amount is certified to the Bond Trustee in a certificate signed by an Authorized Officer.

Fifth: State Payment Fund, to the extent (if any) needed to increase the amount therein to equal a pro rata portion of the State Payment (currently $2,500,000 annually) for the then-current Fiscal Year.

Sixth: General Reserve Fund, any remaining balance of moneys withdrawn from the Revenue Fund pursuant to the terms of the Resolution.

Airport Revenues. All Airport Revenues shall be collected by the Authority and deposited daily, as far as practicable, in the name of the Bond Trustee, with a depositary or depositaries designated by the Authority, such designation to be supplied to the Bond Trustee, together with a statement by the Authority that each such depositary meets the qualifications prescribed in the Resolution for the appointment of Paying Agents; each such depositary to receive such moneys as custodian thereof for the Bond Trustee. Statements showing the amount of each such deposit and the name of the depositary shall be forwarded promptly to the Bond Trustee by the Authority and by such depositary. All such moneys shall be credited to the Airport Revenue Fund. The Bond Trustee shall, on receipt of written instructions signed by an Authorized Officer, transfer from time to time moneys on deposit in the Airport Revenue Fund to an account or accounts (which may be the same account or accounts established pursuant to the Resolution for Revenues so long as Airport Revenues can be accounted for separately) established with any bank or trust company meeting the qualifications set forth in the Resolution for service as a Paying Agent for the purpose of paying the Airport Costs and Expenses. The Authority shall draw upon any such account only for purposes and in amounts authorized by the Act, its then-current Annual Budget and the Resolution. Without limiting the generality of the foregoing, the Bond Trustee, within the first ten (10) days of each calendar month in each Fiscal Year, shall withdraw from the Airport Revenue Fund (to the extent funds are then available in the Airport Revenue Fund for such purposes) and, to the extent any Airport Bonds are Outstanding, deposit into a special subaccount to be established within the Debt Service Account and to be designated as the Airport Bonds Subaccount, an amount equal to the amount (if any) needed to increase the amount in the Airport Bonds Subaccount (including the amount in any Sinking Fund Account established therein) so that it equals a pro rata portion of the Debt Service Requirement on any Airport Bonds then Outstanding, if any, in respect of the next payment date for such Airport Bonds.

The chart shown on the following page summarizes the flow of Revenues prescribed by the Resolution.

-17- MONTHLY FLOW OF FUNDS UNDER THE RESOLUTION

Tolls, Concessions Airport and Other Revenues Legally Available Authority Revenues

Airport Revenue Revenue Pledged Project Fund Fund Retention of 15% of annual Operating Expenses Pledged Project Operating Expenses prior to any outflows (1) Monthly Pro-Rata Debt Deficiency(a) Service Funding Debt All Service Airport Airport Revenue Expenses Available for Debt Service on Airport Bonds

Replenishment requirement Debt Service (2) Reserve Fund

Monthly Pro-Rata R&R requirement for Rehabilitation current Fiscal Year (5) and Repair Fund

As provided for in Subordinated Debt Subordinated (3) Debt Fund

Monthly Pro-Rata State Payment State (4) Payment Remaining Net Fund Revenues Deficiency of Funds in order of priority General above Reserve Fund General Project Operating Expense/ Net Airport Costs & Expenses revenues Other from Special Lawful Projects Purposes

______(a) Numbers represent priority of replenishment of any deficiencies in Debt Service Fund.

-18- Pursuant to the Resolution, the Authority has created the Subordinated Debt Fund. Pursuant to the 2007 Note Resolution, payments of Debt Service on the 2007 Notes shall be designated to be transferred by the Bond Trustee after the required transfers set forth in paragraphs First through Third above, but before the transfers set forth in Paragraphs Fifth through Sixth above.

The Bond Trustee, within the first ten (10) days of each calendar month in each Fiscal Year, after the required transfers set forth in Paragraphs First through Third above, but before the transfers set forth in Paragraphs Fifth through Sixth above, shall transfer from the Revenue Fund to the Subordinated Debt Fund, an amount equal to a pro rata portion of the Subordinated Debt Obligations (other than Subordinated Debt Obligations to be paid from sources other than Revenues) coming due on the next payment date for each issue of Subordinated Indebtedness then outstanding, as such amount is certified to the Bond Trustee by a certificate signed by an Authorized Authority Officer.

If amounts held in the Debt Service Fund, Debt Service Reserve Fund and General Reserve Fund are insufficient to pay the Debt Service Requirement becoming due on the Bonds, the Bond Trustee shall transfer from the Subordinated Debt Fund to the Debt Service Fund an amount sufficient to eliminate such deficiency.

If amounts in the Subordinated Debt Fund are insufficient to pay Subordinated Debt Obligations becoming due, the Bond Trustee shall transfer from the General Reserve Fund to the Subordinated Debt Fund an amount sufficient to eliminate such deficiency, subject to Section 5.12(a) of the Resolution.

On each payment date for an issue of Subordinated Indebtedness, the Bond Trustee shall transfer from the Subordinated Debt Fund to the trustee for or holder of such Subordinated Indebtedness named in the certificate of the Authorized Authority Officer, in immediately available funds, the amount of Subordinated Debt Obligations (other than Subordinated Debt Obligations to be paid from other sources) due on such payment date.

Amounts in all such Funds and Accounts (other than the Rebate Fund and the Airport Revenue Fund) are pledged to secure payment of the Bonds and all Qualified Swap Obligations pending disbursement for the purposes of such Funds and Accounts. The Resolution permits the proceeds of a Series of Bonds deposited in certain Funds to be pledged to that Series of Bonds prior to application to all Bonds, but such superior pledge cannot be made of amounts in the Revenue Fund, Debt Service Reserve Fund (other than amounts deposited for Variable Rate Debt) or the Rehabilitation and Repair Fund. The Resolution also permits the Authority to establish other Funds and Accounts by a Supplemental or Series Resolution. Amounts in the Airport Revenue Fund are pledged to secure payment of the Airport Bonds.

Rate Covenant

The Authority is obligated under the Resolution to, at all times, fix, impose, charge and collect tolls, fares, fees and other charges for the use of the Transportation System in each Fiscal Year in amounts sufficient to meet the following two requirements:

1. Net Revenues and Airport Revenues Available for Debt Service shall at least equal the Net Revenue Requirement for such Fiscal Year. The Net Revenue Requirement is the amount of Net Revenues and Airport Revenues Available for Debt Service for the period under consideration equal to the greater of:

(a) 120% of the Aggregate Debt Service (excluding any Debt Service on Outstanding Bonds for which capitalized interest is available to pay) during such period; or

-19- (b) The sum of the Aggregate Debt Service (excluding any Debt Service on Outstanding Bonds for which capitalized interest is available to pay), Rehabilitation and Repair Requirements, State Payment Requirement, debt service payable during the period on Subordinated Indebtedness, Operating Expenses of General Projects, and other required deposits to Funds under the Resolution, including the Debt Service Reserve Fund and Rebate Fund, all during the period under consideration; and

2. Current Revenues and Airport Revenues Available for Debt Service shall at least equal the Operating Expenses for Pledged Projects for such Fiscal Year, the Debt Service on all Outstanding Bonds (net of capitalized interest) and Subordinated Indebtedness for such Fiscal Year and any required deposits to the Debt Service Reserve Fund, the Rehabilitation and Repair Fund and the General Reserve Fund, if any such deposits are required.

The Authority has covenanted in the 2007 Note Resolution to provide sufficient moneys to pay debt service on the 2007 Notes when and as due.

The Authority shall complete a review of its financial condition within thirty (30) days prior to the end of each Fiscal Year to determine by resolution whether Net Revenues and Airport Revenues Available for Debt Service for the current and the next succeeding year will be sufficient to meet the requirements described in subparagraphs (1) and (2) above. If it is determined that the Revenues and Airport Revenues Available for Debt Service may not be sufficient, the Authority shall cause the Transportation Consultant to study and recommend an appropriate level of tolls, fares, fees and other charges for each Project which, in the opinion of the Transportation Consultant, will cause sufficient Revenues to be collected in the following Fiscal Year to comply, taking into account Airport Revenues Available for Debt Service, with the Net Revenue Requirement and will cause additional Revenues to be collected in such following and later Fiscal Years sufficient to eliminate the amount of any deficiency at the earliest practicable time. Such recommended schedule of tolls, fares, fees and other charges shall be adopted and instituted by the Authority as promptly as practicable but no later than ninety (90) days after the start of the succeeding Fiscal Year. See "THE AUTHORITY – Powers of the Authority; State Oversight" herein.

The Authority may impose new or increase then-existing tolls, passenger facility charges, fares, fees and other charges provided the Transportation Consultant concurs with such action and such affected tolls, fares, fees and other charges account for less than ten percent (10%) of the Revenues, or provided the Transportation Consultant certifies to the Bond Trustee that the affected tolls, fares, fees and other charges will not result in a reduction of Revenues by reason of collectability, reduction in traffic or usage or costs of operation or any other reason.

The Authority cannot reduce any toll, fare, fee or other charge fixed for the use of any Project except after thirty (30) days' notice to the Bond Trustee and after certificates as described in the Resolution are filed with the Bond Trustee by the Authority, the Transportation Consultant and/or the Consulting Engineers. See APPENDIX B - "Copy of the Resolution" hereto.

Rate Regulation

The Act provides that "tolls, fares, and charges shall not be subject to supervision or regulation by any other commission, board, bureau or agency of the State or subdivision of the State". The Act further states that no resolution or other action of the Authority providing for the issuance of bonds, notes, refunding bonds or other obligations or for the fixing, revising or adjusting of tolls, fares or charges for the use of any project or parts or sections thereof shall be adopted or otherwise made effective by the Authority without the prior approval in writing of the Governor and either the State Treasurer or the

-20- Director of the Division of Budget and Accounting in the State Department of the Treasury (collectively, "State Officers"). The Governor has certain veto powers with respect to the minutes of Authority meetings and can veto Authority resolutions approving rate increases. See "THE AUTHORITY - Powers of the Authority; State Oversight" herein.

The Act further provides that the powers conferred upon the State Officers shall be exercised with due regard for the rights of the holders of bonds of the Authority and nothing in, or done pursuant to, the provisions of the Act conferring such powers shall in any way limit, restrict or alter the obligations or powers of the Authority or any representative or officer of the Authority to carry out and perform in every detail each and every covenant, agreement or contract at any time made or entered into by or on behalf of the Authority with respect to its bonds or for the benefit, protection or security of the holders thereof. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES - State Agreements With Bondholders" herein.

Debt Service Reserve Fund

Under the Resolution, the Debt Service Reserve Requirement with respect to all Bonds is equal to the lesser of (i) the maximum permitted by the Internal Revenue Code of 1986, as amended ("Code") or (ii) the maximum annual principal, sinking fund installment and interest payable on all Bonds Outstanding in a calendar year. The Debt Service Reserve Requirement for the Outstanding Bonds is $18,880,962.50 which amount is equal to maximum annual debt service on such Outstanding Bonds and is within the maximum amount permitted to be funded pursuant to the Code. THE DEBT SERVICE RESERVE FUND DOES NOT SECURE THE 2007 NOTES.

If on any Payment Date there shall not be a sufficient amount in the Debt Service Fund to provide for the payment of debt service on Bonds as required under the provisions of the Resolution or Series Resolution, the Bond Trustee shall withdraw from the Debt Service Reserve Fund and pay into the Debt Service Fund an amount sufficient to make up such deficiency. Whenever the moneys on deposit in the Debt Service Reserve Fund shall exceed the Debt Service Reserve Requirement, the Bond Trustee, at the direction of an Authorized Officer of the Authority, shall withdraw the amount of such excess and, except as provided in the Resolution or Series Resolution, deposit such amount in the Revenue Fund. Whenever the moneys in the Debt Service Reserve Fund, together with the amount in the Debt Service Fund, are sufficient to pay all Outstanding Bonds in accordance with their terms and all Qualified Swap Obligations owed by the Authority under all Qualified Swap Agreements, the funds on deposit in the Debt Service Reserve Fund shall be transferred to the Debt Service Fund.

Notwithstanding the foregoing, in lieu of the required cash deposits into the Debt Service Reserve Fund, the Authority may cause to be deposited into the Debt Service Reserve Fund a surety bond, an insurance policy or an irrevocable letter of credit ("Debt Reserve Policy") payable to the Bond Trustee for the benefit of the Owners of the Bonds or any Series thereof in an amount equal to the difference between the Debt Service Reserve Requirement and the remaining sums, if any, then on deposit in the Debt Service Reserve Fund. The Debt Reserve Policy shall be payable (upon the giving of notice as required thereunder) on any Payment Date on which moneys shall be required to be withdrawn from the Debt Service Reserve Fund and applied to the payment of a Principal Installment of or interest on any Bonds and such withdrawal cannot be met by amounts on deposit in the Debt Service Reserve Fund or provided from any other Fund under the Resolution or Series Resolution. Any such Debt Reserve Policy shall be issued by an institution having credit ratings at least equal to, and given by the same Rating Agencies as, the credit ratings on the Series of Bonds to which it relates. The Authority shall retain the right to cancel such Debt Reserve Policy upon not less than one hundred eighty (180) days' written notice in the event of a reduction or suspension of any of the credit ratings with respect to such Debt Reserve Policy (or the provider thereof). The Authority shall no later than the effective date of such cancellation either provide a substitute Debt Reserve Policy meeting the credit rating requirements or shall deposit cash in the Debt Service Reserve Fund so that the amount in such Fund shall equal the Debt Service Reserve Requirement.

-21- If a draw or disbursement is made under such Debt Reserve Policy, the Authority shall be obligated either (1) to reinstate the maximum limits of such Debt Reserve Policy or (2) to deposit into the Debt Service Reserve Fund, funds in the amount of the disbursement made under such Debt Reserve Policy, or a combination of such alternatives, as shall provide that the amount in the Debt Service Reserve Fund equals the Debt Service Reserve Requirement within six (6) calendar months of such draw or disbursement.

The Debt Reserve Policy may have a stated expiration date ("Policy Expiration Date") that is earlier than the final maturity of the Bonds, provided that, simultaneously with the delivery of the Debt Reserve Policy for deposit to the Debt Service Reserve Fund, the Authority shall also cause to be deposited in the Debt Service Reserve Fund ("Supplemental Deposit") non-callable, non-refundable Investment Securities, maturing not later than the Policy Expiration Date, the principal of and interest on which when due will be in an amount at least equal to the amount of the Debt Reserve Policy. For purposes of Section 5.08(a) and (b) of the Resolution, the Bond Trustee shall not, so long as the Debt Reserve Policy is in effect, take the Supplemental Deposit into account in determining the amount on deposit in the Debt Service Reserve Fund.

In connection with the issuance of the 2003 Bonds, the Authority purchased a Municipal Bond Debt Service Reserve Insurance Policy ("FSA Policy") from Financial Security Assurance Inc. ("FSA") with a policy limit of $2,289,600. Since the 2003 Bonds were refunding bonds which did not give rise to any additional Debt Service Reserve Requirement, a like amount of cash was withdrawn from the Debt Service Reserve Fund when the FSA policy was issued.

Prior to the issuance and delivery of the Debt Reserve Policy, the Authority and FSA entered into an Insurance Agreement ("Insurance Agreement"). Pursuant to the Insurance Agreement, commencing with the first month following any draw under the Debt Reserve Policy, the Authority shall be required to make monthly payments to FSA in an amount at least equal to 1/12th of the principal amount of such draw and all related reasonable expenses incurred by FSA, together with interest thereon.

The Debt Reserve Policy is held by the Paying Agent in the Debt Service Reserve Fund and was provided as an alternative to the Authority depositing funds equal to a portion of the Debt Service Reserve Requirement for the Bonds.

Although the FSA Policy expires on November 1, 2012, the Debt Service Reserve Requirement will remain at the same level until 2029, because of the Authority’s level debt service structure. To ensure that the Debt Service Reserve Fund will be properly funded after the FSA Policy expires, the Authority also entered into a Master Repurchase Agreement and Annex I thereto with FSA Capital Management Services LLC to provide Investment Securities with a maturity value of $2,289,600 on the second business day before November 1, 2012. This Master Repurchase Agreement was deposited as a special deposit into the Debt Service Reserve Fund. The cost of the Authority’s initial investment under this Master Repurchase Agreement was $1,552,000, leaving $737,600 for deposit to the Revenue Fund established under the Resolution.

General and Pledged Projects

The Resolution provides for the financing of Projects having financial characteristics of two types: (i) Projects generating Revenues sufficient to pay the Operating Expenses (as hereinafter defined) and the Rehabilitation and Repair Requirement (as hereinafter defined) associated with such Projects (collectively, designated "Pledged Projects"); and (ii) Projects which do not generate Revenues sufficient to fully pay associated Operating Expenses and the Rehabilitation and Repair Requirement (designated "General Projects"). The Pledged Projects and General Projects together form the Transportation System, as defined in the Resolution. The types of Projects, facilities and services authorized by the Act to be undertaken by the Authority are described in "AUTHORIZED PROJECTS" herein.

-22- Operating Expenses means the Authority’s expenses for operation, maintenance (but only those maintenance expenses which have not been capitalized), repairs, ordinary replacement and ordinary reconstruction of Pledged Projects and General Projects and ordinary acquisition of equipment therefore.

Rehabilitation and Repair Requirement means for each Fiscal Year of the Authority that amount which the Authority shall provide in the annual budget of the Authority sufficient to make deposits to the Rehabilitation and Repair Fund for the account of each Pledged Project: (i) to restore or prevent physical damage to each such Project or any part thereof, (ii) for the safe and efficient operation of each such Project, or (iii) to prevent loss of Revenues generated by such Project(s).

The following table summarizes the characteristics of Pledged Projects and General Projects and lists the projects now operated or planned by the Authority under each category.

Pledged Projects General Projects

Basic Characteristics Projects whose annual revenues Projects which do not generate are at least equal to annual annual revenues sufficient to fully Operating Expenses and pay associated annual Operating Rehabilitation and Repair Expenses and the Rehabilitation and Requirement. Repair Requirement or if they do so, have not been designated as Pledged Projects or Special Projects by the Authority.

Existing or Planned x Expressway Project (the x Airport, which includes the Projects of the Expressway and Additional Airport Parking Garage Project Authority Expressway Projects, including the 2007 Capital x New York Avenue Parking Projects) Garage x Atlantic Avenue Surface Parking Lot x 1992 Capital Projects (including the bus management, tourist services and economic development programs) x Atlantic City/Brigantine Connector x Fairmount Avenue Surface Parking Facility

Operating Expenses of Pledged Projects are paid prior to required payments of Debt Service and payments to the Debt Service Reserve Fund and other Funds. Operating Expenses of General Projects are payable from the General Reserve Fund and are therefore subordinated to the payment of Debt Service on Bonds. Airport Costs and Expenses are payable in the first instance from Airport Revenues on deposit in the Airport Revenue Fund, including debt service on Airport Bonds which is required to be transferred from the Airport Revenue Fund to the Debt Service Account on a prorated basis within the first ten (10) days of each calendar month. The Airport Subsidy, if any, is payable from the General Reserve Fund as a General Project Operating Expense.

The Resolution permits the Authority to redesignate a General Project as a Pledged Project, but only if the Authority delivers to the Bond Trustee (i) a Certificate of an Authorized Officer to the effect that such Project has generated Revenues sufficient to pay its Operating Expenses and what would have

-23- been its Rehabilitation and Repair Requirement in the Fiscal Year of designation, and (ii) projections made by a Consulting Engineer projecting for the next five (5) Fiscal Years Revenues to be generated by such Project sufficient to pay its Operating Expenses and its Rehabilitation and Repair Requirement.

The Resolution also defines Special Projects as Projects the financing and operation of which does not pledge or have a claim on the general credit of the Authority or any Revenues, and is not entitled to the benefits of the Resolution, but which Project financing and the operating expenses of which are payable solely from sources other than Revenues. Any Special Projects undertaken by the Authority are to be financed under other resolutions to be adopted by the Authority and are not part of the Transportation System.

The Authority may not designate a Project as a Special Project (and thereby remove it from the operations of the Resolution) unless it delivers to the Bond Trustee a certificate of an Authorized Officer to the effect that such designation and removal of the Revenues generated by such Project from the calculation of the Net Revenue Requirement would not have caused the Authority to breach the rate covenant described above had such designation and removal of Revenues occurred in the preceding Fiscal Year. Holders of obligations issued to finance Special Projects will have no right or claim on the Revenues pledged to secure the Bonds and Qualified Swap Obligations, if any, or on any of the funds held under the Resolution.

Additional Bonds

The Authority may from time to time issue one or more Series of Bonds in addition to those then Outstanding ("Additional Bonds") for the purposes set forth in the Resolution upon compliance with the applicable conditions set forth in the Resolution or Series Resolution. Additional Bonds may be authorized and issued from time to time:

x To meet all or a part of the Costs of or to provide additional moneys to complete any Pledged Project or General Project;

x To provide moneys in excess of net insurance proceeds or condemnation awards to meet the Costs of restoring any Pledged Project or General Project after a casualty loss or a taking; or

x To provide all or a part of the moneys necessary to refund or advance refund any or all Outstanding Bonds or Subordinated Indebtedness issued under the Resolution or Series Resolution or issued under any other resolutions of the Authority.

Such Additional Bonds shall be equally and ratably secured with the Outstanding Bonds and Qualified Swap Agreements and shall be authenticated by the Bond Trustee and delivered to the Authority or upon its order only upon receipt by the Bond Trustee of the documents, instruments and certificates and the full and complete satisfaction of the conditions required by and set forth in the Resolution and, if applicable, a Series Resolution. See APPENDIX B - "Copy of the Resolution" hereto.

The Resolution specifies conditions to the issuance of Additional Bonds for Pledged Projects and General Projects. Certain of those conditions are summarized below.

Conditions to Issuance of Additional Bonds for Pledged Projects. Section 2.05 of the Resolution establishes the conditions precedent to the issuance of Additional Bonds to pay all or part of the Costs of a Pledged Project, including delivery of the following certificates:

(a) A certificate of an Authorized Officer setting forth (1) the Current Net Revenues and Airport Revenues Available for Debt Service for any period of 12 consecutive calendar months out of the 24 calendar months next preceding the authentication and delivery of the Bonds of such Series, provided that if any adjustment of tolls, fares, fees and other charges shall have been placed in effect subsequent to the beginning of such 12-month period, such Current Net Revenues shall reflect the

-24- relevant Revenues which the Transportation Consultant estimates in a certificate delivered with the certificate delivered pursuant to clause (c) below would have resulted had such rate adjustment been in effect for the entire 12-month period, and (2) the Net Revenue Requirement for such 12 calendar months (without regard to the Bonds proposed to be issued), which certificate shall demonstrate that such Current Net Revenues and Airport Revenues Available for Debt Service equal or exceed such Net Revenue Requirement;

(b) A certificate of the Transportation Consultant stating whether, to the best of such Consultant’s knowledge, any Federal, State or other agency is then projecting or planning the construction, improvement or acquisition of any facility which, in the opinion of the Transportation Consultant, may be materially competitive with the Pledged Project being financed with the Bonds proposed to be issued, and the estimated date of completion of such facility;

(c) An estimate of Revenues and Airport Revenues Available for Debt Service ("Pledged Project ABT Revenue Estimate") consisting of:

(i) a certificate of the Transportation Consultant setting forth for the then current and each future calendar year to and including the third full calendar year after the estimated date when the proposed Pledged Project will be placed in service, estimates of Revenues (other than Excluded Revenues, if any) and Airport Revenues Available for Debt Service giving effect to (1) the completion of construction of any uncompleted Pledged Project including the proposed Pledged Project; (2) the assumption that any competitive facility referred to in the certificate delivered pursuant to clause (b) above will be completed on the date therein estimated and will thereafter be in operation during the period covered by such estimates, and (3) any adjustment of rates which shall have been placed in effect subsequent to the beginning of the 12-month period referred to in the certificate of an Authorized Officer delivered pursuant to clause (a) above, as if such rate adjustment had been in effect from the beginning of such period until the effective date of any further rate adjustment, as described next, and (4) any further rate adjustment with respect to such Pledged Project, in addition to that referred to in clause (a) above, which in the opinion of the Transportation Consultant, would be necessary to enable the Authority to continue to meet the Net Revenue Requirement (taking into account the projected debt service on the proposed Bonds). Notwithstanding the foregoing, if the proposed Pledged Project is an Expressway Project, no effect shall be given to a further rate adjustment with respect to such proposed Pledged Project as described in clause (4) of the preceding sentence except for rates to be charged at an already established schedule for such proposed Pledged Project; and

(ii) with respect to Excluded Revenues, if any, either (1) the Authority’s statement of actual unadjusted Revenues received by the Authority during the prior 12-month period, as included in the Authorized Officer’s certificate provided in paragraph (a) above, or (2) the Authority’s estimates of such Excluded Revenues;

(d) (i) A certificate of the Consulting Engineers setting forth (1) for the years and on the assumptions specified in the Pledged Project ABT Revenue Estimate, estimates of the Operating Expenses of Pledged Projects, giving effect to the construction of any planned, proposed or otherwise uncompleted Pledged Project, (2) the estimated total Cost of Construction of each such uncompleted Pledged Project, and (3) the estimated date of completion of each such uncompleted Pledged Project; and (ii) a certificate of an Authorized Officer setting forth for General Projects the same type of information included in the Consulting Engineer’s certificate for Pledged Projects, as provided in the clause (d)(i) above; and

(e) (i) A certificate of an Authorized Officer setting forth the estimated Current Net Revenues, using the information contained in the Pledged Project ABT Revenue Estimate and the certificate delivered pursuant to clause (d) above, for the current and each future calendar year through the aforesaid third full calendar year, and stating that such estimated Current Net Revenues and Airport

-25- Revenues Available for Debt Service shall, in the current and each future calendar year until the aforesaid third calendar year, satisfy the Net Revenue Requirement and, in the third full calendar year after the estimated date when the proposed Pledged Project will be placed in service, equal at least the greater of (1) 120% of the maximum annual Aggregate Debt Service on all Bonds at the time Outstanding, including the proposed Series of Bonds, and all Qualified Swap Obligations, and (2) the sum of 100% of the maximum annual Aggregate Debt Service on all obligations of the Authority Outstanding under the Resolution, including all Qualified Swap Obligations, plus the projected Rehabilitation and Repair Requirements, State Payment Requirement, debt service payable on Subordinated Indebtedness, Operating Expenses of General Projects, and other required deposits to Funds, including the Debt Service Reserve Fund and Rebate Fund, for such year; and

(ii) A certificate of an Authorized Officer to the effect that Current Net Revenues and Airport Revenues Available for Debt Service determined as set forth in paragraph (a) above, less Operating Expenses of General Projects, are equal to at least 100% of maximum annual Debt Service on all Bonds Outstanding, including the Bonds proposed to be issued, and all Qualified Swap Obligations. The computation of Debt Service in the preceding sentence may exclude Debt Service on Bonds payable from the following sources:

(1) a residual agreement with an airline having an investment grade rating from the Rating Agencies, entered into for Airport Projects having a general airport purpose; or

(2) an unconditional obligation of one or more political subdivisions of the State assigned a general obligation rating of at least "A" by Moody’s or S & P (or both if rated by both); or

(3) an obligation of the State or one or more of its agencies or instrumentalities if the obligation is rated at least "A" by the Rating Agencies; or

(4) an obligation of an instrumentality or agency of the United States of America or a federally chartered corporation if the obligation is rated at least "AA" and "Aa", respectively, by the Rating Agencies.

The obligations and contracts described in clauses (1) through (4) must have a term extending to the final maturity of the proposed Series of Bonds.

See APPENDIX B - "Copy of the Resolution - Conditions to Issuance of Bonds for Pledged Projects" hereto.

Conditions to Issuance of Bonds for General Projects. The Resolution further establishes the conditions precedent to the issuance of Additional Bonds to pay all or part of the Costs of a General Project, which conditions include delivery of the following certificates:

(a) A certificate of an Authorized Officer setting forth (1) the Current Net Revenues and Airport Revenues Available for Debt Service for any period of 12 consecutive calendar months out of the 24 calendar months next preceding the authentication and delivery of the Bonds of such Series, provided that if any adjustment of rates shall have been placed in effect subsequent to the beginning of such 12-month period, such Current Net Revenues shall reflect the relevant Revenues to be generated by all Projects which the Transportation Consultant estimates in a certificate delivered with their certificate delivered pursuant to clause (c) below would have resulted had such rate adjustment been in effect for the entire 12-month period, and (2) the Net Revenue Requirement for such 12 calendar months (without regard to the Bonds proposed to be issued), which certificate shall demonstrate that such Current Net Revenues and Airport Revenues Available for Debt Service equal or exceed such Net Revenue Requirement, and that such Net Revenues and Airport Revenues Available for Debt Service

-26- equal at least 120% of maximum Aggregate Debt Service, inclusive of the Bonds proposed to be issued;

(b) A certificate of the Transportation Consultant stating whether, to the best of its knowledge, any Federal, State or other agency is then projecting or planning the construction, improvement or acquisition of any other facility which, in the opinion of the Transportation Consultant, may be materially competitive with any Project or Projects, and the estimated date of completion of such highway or facility;

(c) An estimate of Revenues and Airport Revenues Available for Debt Service ("General Project ABT Revenue Estimate") consisting of:

(i) A certificate of the Transportation Consultant setting forth for the then current and each future calendar year to and including the third full calendar year after the estimated date when the General Project will be placed in service, estimates of Revenues (other than Excluded Revenues, if any) and Airport Revenues Available for Debt Service to be generated by all Projects, giving effect to the construction of any uncompleted Project, on the assumption that any competitive facility referred to in the certificate delivered pursuant to clause (b) above will be completed on the date therein estimated and will thereafter be in operation during the period covered by such estimates, and employing for purposes of such certificate the schedule of tolls and other rates and charges in effect on the date of such certificate; and

(ii) with respect to Excluded Revenues, if any, either (1) the Authority’s statement of actual unadjusted Revenues received by the Authority during the prior 12-month period, as included in the Authorized Officer’s certificate provided in paragraph (a) above, or (2) the Authority’s estimates of such Excluded Revenues;

(d) A certificate of the Consulting Engineers setting forth (1) for the years and on the assumptions specified in the General Project ABT Revenue Estimate, estimates of the Operating Expenses, giving effect to the construction of any planned, proposed or otherwise uncompleted Project, (2) the estimated total Cost of Construction of each such uncompleted Project, and (3) the estimated date of completion of each such uncompleted Project; and

(e) A certificate of an Authorized Officer setting forth the estimated Current Net Revenues and Airport Revenues Available for Debt Service using the information contained in the General Project ABT Revenue Estimate and the certificate delivered pursuant to clause (d) above, for the current and each future calendar year through the aforesaid third full calendar year, and stating that such estimated Current Net Revenues and Airport Revenues Available for Debt Service, if any, shall, in each of the calendar years through the third full calendar year after the estimated date when the proposed General Project will be placed in service, equal at least the greater of (1) 120% of the maximum annual Aggregate Debt Service on all Bonds at the time Outstanding, including the proposed series of Bonds and all Qualified Swap Obligations, and (2) the sum of 100% of the maximum Annual Debt Service on all obligations of the Authority Outstanding under the Resolution, including all Qualified Swap Obligations, plus the projected Rehabilitation and Repair Requirements, State Payment Requirement, debt service payable on Subordinated Indebtedness, Operating Expenses of General Projects, and other required deposits to Funds, including the Debt Service Reserve Fund and Rebate Fund, for such year.

See APPENDIX B - "Copy of the Resolution - Conditions to Issuance of Bonds for General Projects" hereto.

Refunding Bonds. One or more Series of Bonds may be issued to refund any or all Outstanding Bonds or Subordinated Indebtedness ("Refunding Bonds"). The Resolution further establishes the conditions precedent to the issuance of the Refunding Bonds, which include delivery of the following certificates:

-27- (a) A certificate of an Authorized Officer demonstrating that the term of the Refunding Bonds is not greater than the term of the refunded Bonds or other obligations being refinanced, and the Debt Service Requirements on the Refunding Bonds in each Fiscal Year shall not be greater than 105% of the maximum annual Debt Service on the refunded Bonds or obligations being refunded; provided that the greater debt service on the Refunding Bonds shall be occasioned by the issuance of Refunding Bonds to satisfy the Debt Service Reserve Requirement and to fund associated issuance and refunding costs, including redemption premium; or

(b) Debt Service on the Refunding Bonds is not greater than Debt Service on the refunded Bonds in any year in which the refunded Bonds would have been Outstanding, but only if maximum annual Debt Service on the Refunding Bonds is less than maximum Annual Debt Service on the refunded Bonds; or

(c) If the requirements of (a) or (b) above are not met, then the Authority shall meet either the requirements of issuance of Additional Bonds for Pledged Projects, if the Bonds being refinanced are at the time related to a Pledged Project, or the requirements of issuance of Additional Bonds for General Projects, if the Bonds being refinanced are at the time related to a General Project.

The Authority is required under the Resolution to provide such instructions to the Bond Trustee as are necessary to comply with all requirements set forth in the Resolution so that the Bonds to be refunded will be paid or deemed to be paid pursuant thereto. The Authority will either deposit with the Bond Trustee (1) moneys in an amount sufficient to effect payment of the principal or Redemption Price, if applicable, and interest due and to become due on the Bonds to be refunded on or prior to the redemption date or maturity date thereof, as the case may be, which moneys shall be held by the Bond Trustee or any one or more of the Paying Agents in a separate account irrevocably in trust for the Holders of the Bonds to be refunded, or (2) Federal Securities in such principal amounts, of such maturities, and bearing interest at such rates as shall be necessary, together with the moneys, if any, deposited with the Bond Trustee at the same time, to comply with the defeasance provisions of the Resolution.

If the Refunding Bonds being proposed are to be issued to refinance Subordinated Indebtedness, the Refunding Bonds shall be authenticated and delivered by the Bond Trustee only upon receipt by it of, among other things, (1) the instruments required to be furnished for the issuance of Bonds for Pledged Projects if the obligations being refinanced are related to a Pledged Project, or the instruments required to be furnished for the issuance of Bonds for General Projects if the obligations being refinanced are at the time related to a General Project; (2) a certificate of the lender or representative or trustee then duly appointed or acting under the indenture, resolution or other instrument securing and authorizing such Subordinated Indebtedness, that (A) provision has been duly made for the redemption or payment at maturity of such Subordinated Indebtedness in accordance with the terms thereof, (B) the pledge, if any, pursuant to the Resolution securing such Subordinated Indebtedness shall have been discharged and satisfied, and (C) such lender, representative or trustee for Subordinated Indebtedness holds in trust the moneys or securities required to effect such redemption or payment; and (3) a Counsel’s Opinion to the effect that all actions required under the indenture, resolution or other instrument securing and authorizing such Subordinated Indebtedness to provide for the redemption or payment of such Subordinated Indebtedness have been taken.

See APPENDIX B - "Copy of the Resolution - Conditions to Issuance of Bonds for Purposes of a Refunding" hereto.

-28- Other Forms of Obligations; Subordinated Indebtedness; Revenue Anticipation Notes

The Authority is authorized by the Resolution to issue serial bonds, term bonds, Capital Appreciation Bonds, Variable Rate Debt, Demand Obligations and other forms of short- and long-term indebtedness, including, but not limited to, documents, agreements, instruments and certificates issued by the Authority in connection with the acquisition or securing of a Credit Facility or Liquidity Facility, Commercial Paper, Demand Obligations and Variable Rate Debt. All such forms of debt may be issued as Additional Bonds or may be issued as Subordinated Indebtedness which shall be subordinate in all respects to the pledge and lien granted pursuant to the Resolution for the benefit of the Holders of Bonds and for the payment of Qualified Swap Obligations, if any. The 2007 Notes are being issued as and constitute "Subordinated Indebtedness" under the Resolution.

The Resolution permits the Authority to create a fund to be designated "Subordinated Debt Fund" into which payments for debt service on Subordinated Indebtedness may be made after required payments into the Debt Service Fund, Debt Service Reserve Fund and Rehabilitation and Repair Fund and before payments to other Funds. Subordinated Indebtedness may be secured only by the pledged amounts, if any, in a Subordinated Debt Fund and amounts in the General Reserve Fund. All such indebtedness may only be incurred for the purposes specifically authorized in the Resolution and Series Resolution or for the payment or refinancing of Subordinated Indebtedness. Any event of default, however, with respect to any Subordinated Indebtedness, may not in itself create an Event of Default with respect to the Bonds and no Subordinated Indebtedness may be accelerated unless the Bonds are first accelerated. No Subordinated Indebtedness may be issued unless the Authority first determines by certified resolution that the issuance of such Subordinated Indebtedness will not impair the financial viability of the Authority and its operations.

The Authority may also issue revenue anticipation notes, which shall have a priority, in the Fiscal Year in which issued, for payment as Operating Expenses of Pledged Projects.

The Authority is a party to an ISDA Master Agreement and Confirmation thereunder constituting a Swaption (each a "Swaption") with each of Bank of America, N.A. ("Bank of America") and Wachovia Bank, National Association ("Wachovia" and, together with Bank of America, the "Swaption Providers"). Under the terms of each Swaption, the applicable Swaption Provider has the option to enter into an interest rate exchange agreement (each an "Interest Exchange Agreement") with the Authority in the initial notional amount set forth below. Upon entering into its respective Swaption, each Swaption Provider paid the Authority a Premium and certain additional amounts in respect of professional fees and to CIFG Assurance North America Inc. an insurance commitment fee, and each Swaption Provider is further required to pay the Authority an Exercise Fee in connection with any exercise of its respective option, all as set forth below:

Bank of America Wachovia Bank Initial Notional Amount $52,675,000.00 $35,120,000.00 Premium 4,552,500.00 3,035,000.00 Professional Fees 96,000.00 64,000.00 Insurance Commitment Fee 202,402.17 134,934.00 Exercise Fee 1,319,597.52 879,731.00

Each option is exercisable in whole only under the European option style on July 1, 2009. If either option is exercised, the Authority will pay the Swaption Provider a fixed rate of 4.70% and will receive a variable rate equal to 75% of USD-LIBOR-BBA on the amortizing notional amount of the Interest Rate Exchange Agreement.

The combined aggregate initial notional amount of the Swaptions is $87,795,000, which is equal to the Outstanding aggregate principal amount of the term 1999 Bonds maturing on November 1, 2029 in the principal amount of $87,795,000 ("Hedged Bonds"), and the aggregate amortization schedule for the

-29- Swaptions corresponds to the Sinking Fund Installments for the Hedged Bonds. If the Swaptions are exercised, a series of Refunding Bonds to be issued on November 1, 2009 to currently refund the Hedged Bonds, if and when issued, will constitute Related Bonds with respect to the Interest Exchange Agreement for purposes of the Resolution, and the Interest Exchange Agreement will then constitute Bond Related Transactions. Prior to the issuance of the related Bonds, the Swaptions are, and, if the Swaptions are exercised, the Interest Exchange Agreements will be, Exchange Agreements, and from and after the date of issuance of the Related Bonds, the Interest Exchange Agreements will be Qualified Swaps, except that the obligations of the Authority to make payments to the Swaption Providers in connection with the early termination of the Swaptions or Interest Exchange Agreements will continue to be Exchange Agreements for purposes of the Resolution.

For so long as either Swaption or Interest Exchange Agreement constitutes an Exchange Agreement, the obligations of the Authority to make payments to the Swaption Providers shall be payable only from amounts on deposit in the General Reserve Fund and are subject and subordinate to the rights of the Holders and to obligations payable from Funds created under the Resolution other than the General Reserve Fund.

For so long as any Swaption or Interest Exchange Agreement constitutes a Qualified Swap, the obligations of the Authority to make payments to the Swaption Providers shall be payable from amounts on deposit in the Debt Service Fund and are equally and ratably secured with the obligation of the Authority to pay Debt Service on the Bonds by the pledge of the lien created pursuant to the Resolution in favor of the Holders.

The obligations of the Authority to make Termination Payments to the Swaption Providers shall be payable only from amounts on deposit in the General Reserve Fund established under the Resolution and are subject and subordinate to the rights of the Holders and to obligations payable from Funds created under the Resolution other than the General Reserve Fund.

If the Swaptions are exercised, the Interest Exchange Agreements will terminate on November 1, 2029, unless terminated sooner in whole or in part in accordance with their terms. In the event that an Interest Exchange Agreement terminates prior to its stated termination date, either the Authority or the applicable Swaption Provider will be required to make a termination payment to the other party. The party required to make such payment and the amount thereof will be determined by market conditions at the time of such early termination.

In the event that the Related Bonds are issued, the method of determining the floating rate payable by each Swaption Provider under its respective Interest Exchange Agreement is likely to be different from the method of determining the floating rate payable by the Authority under the Related Bonds. There can be no assurance that the floating amounts received by the Authority under the Interest Exchange Agreements in any period will be sufficient to pay the interest accruing on the Related Bonds during such period.

No financial or other information has been authorized to be provided herein with respect to either Swaption Provider. There can be no assurance that either Swaption Provider will pay or perform its obligations under its respective Swaption and, if such Swaption is exercised, its respective Interest Exchange Agreement in accordance with the terms thereof, or that such Swaption Provider will be able to pay any Termination Payment which it may be required to pay upon the occurrence of certain events of default or termination events under its respective Swaption or Interest Exchange Agreement.

-30- State Relationship to Bond Security

The Act provides that no action of the Authority providing for the fixing, revising or adjusting of tolls, fares, or charges shall be adopted or made effective without the prior approval in writing by the Governor and the State Officers. The Act further provides that the foregoing powers shall be exercised by the State Officers with due regard for the rights of holders of bonds of the Authority at any time Outstanding. The Act further includes the pledge, covenant and agreement of the State with the holders of any bonds of the Authority, among other things, not to limit the rights or powers vested in the Authority to fix, establish, charge and collect tolls or other charges convenient or necessary to produce sufficient revenues to meet expenses of the Authority and fulfill the terms of any agreement with the holders of bonds, such as the Resolution and the 2007 Note Resolution, and not to impair the rights and remedies of the holders of the Authority's bonds. Finally, the Governor has certain approval rights with respect to actions taken at Authority meetings. See "THE AUTHORITY - Powers of the Authority; State Oversight" herein.

THE 2007 NOTES ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE MONEYS AND SECURITIES FROM TIME TO TIME ON DEPOSIT IN THE SUBORDINATED DEBT FUND AND THE GENERAL RESERVE FUND PURSUANT TO THE TERMS OF THE RESOLUTION AND SUBJECT TO SECTION 5.12(A) OF THE RESOLUTION. NEITHER THE STATE OF NEW JERSEY NOR ANY INSTRUMENTALITY THEREOF, OTHER THAN THE AUTHORITY (TO THE LIMITED EXTENT SET FORTH IN THE 2007 NOTE RESOLUTION), IS OBLIGATED TO PAY THE 2007 NOTES AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NEW JERSEY OR ANY POLITICAL SUBDIVISON THEREOF IS PLEDGED TO THE PAYMENT OF THE 2007 NOTES. THE AUTHORITY HAS NO TAXING POWER.

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-31- DEBT SERVICE REQUIREMENTS

The following table sets forth annual Debt Service Requirements for all Outstanding Bonds of the Authority.

Debt Service on Outstanding Bonds Bond Year Ending Total November 1 Series 1999 Series 2003 Series 2004 Series 2006 Debt Service 2007 $12,906,013 $2,262,925 $1,439,694 $2,266,425 $18,875,057 2008 12,906,013 2,267,200 1,436,794 2,266,425 18,876,432 2009 12,908,013 2,266,550 1,436,394 2,266,425 18,877,382 2010 12,904,163 2,265,150 1,439,331 2,266,425 18,875,069 2011 12,905,700 2,265,638 1,435,925 2,266,425 18,873,688 2012 12,902,000 2,268,138 1,436,325 2,266,425 18,872,888 2013 15,172,800 --- 1,435,288 2,266,425 18,874,513 2014 15,173,138 --- 1,437,763 2,266,425 18,877,326 2015 15,175,363 --- 1,439,175 2,266,425 18,880,963 2016 15,171,613 --- 1,435,250 2,266,425 18,873,288 2017 15,174,863 --- 1,434,750 2,266,425 18,876,038 2018 15,173,863 --- 1,438,500 2,266,425 18,878,788 2019 15,172,863 --- 1,435,500 2,266,425 18,874,788 2020 15,170,863 --- 1,436,000 2,266,425 18,873,288 2021 15,170,263 --- 1,434,750 2,266,425 18,871,438 2022 15,170,319 --- 1,436,750 2,266,425 18,873,494 2023 15,174,750 --- 1,436,750 2,266,425 18,877,925 2024 15,170,500 --- 1,434,750 2,266,425 18,871,675 2025 15,174,500 --- 1,435,750 2,266,425 18,876,675 2026 15,175,000 --- 1,439,500 2,266,425 18,880,925 2027 15,170,750 --- 1,435,750 2,266,425 18,872,925 2028 15,170,500 --- 1,439,750 2,266,425 18,876,675 2029 15,172,500 --- 1,436,000 2,266,425 18,874,925 2030 ------1,434,750 9,331,425 10,766,175 2031 ------1,435,750 9,328,500 10,764,250 2032 ------1,438,750 9,326,400 10,765,150 2033 ------1,438,500 9,324,450 10,762,950 2034 ------10,761,975 10,761,975 2035 ------10,763,500 10,763,500

Total $335,366,350 $13,595,601 $38,794,189 $110,964,025 $498,720,165

-32- In addition, the Authority has Outstanding $54,999,360 in aggregate initial issuance amount of Special Revenue Bonds payable from amounts received by the Authority from CRDA pursuant to the CRDA Pledge Agreement. As of January 1, 2005, the Special Revenue Bonds had converted to accrue, rather than accrete, interest and the accreted value is $65,840,000. The Special Revenue Bonds have no lien on the Net Revenues or the amounts on deposit in the Funds and Accounts established under the Resolution. See "ATLANTIC CITY/BRIGANTINE CONNECTOR" herein for more information regarding the Special Revenue Bonds.

THE AUTHORITY

The Authority's mailing address and telephone number are:

South Jersey Transportation Authority Farley Service Plaza P.O. Box 351 Hammonton, New Jersey 08037 (609) 965-6060

Members and Management

The Authority consists of the State Commissioner of Transportation, who is an ex officio voting member, the Secretary/CEO, New Jersey Commerce and Economic Growth Commission, who is an ex officio nonvoting member, and seven (7) members appointed by the Governor with the advice and consent of the Senate, six (6) of whom must be residents of South Jersey, four (4) of whom must be residents of that portion of South Jersey within a 30-mile radius of the civil aviation terminal at the Airport or of municipalities through which the Expressway traverses, and two (2) of whom must be residents of that portion of South Jersey outside of a 30-mile radius of the Airport terminal; provided that all of the appointed members must have expertise in transportation, finance, law, public administration, aviation or any other related field. Not more than four (4) of the appointed members may be members of the same political party. Each appointed member must have been a qualified voter of the State for at least one (1) year preceding the appointment. There are currently two (2) vacancies on the Board of the Authority. The present members of the Authority, their counties of residence, and date of expiration of their terms are as follows:

Authority County of Business Expiration Member Residence Affiliation Term Kris Kolluri, Esq., N/A Commissioner, New Jersey 2007 Chairman Department of Transportation Ex-Officio Voting Member Mark A. Summerville Burlington Business Representative of Sheet 2008 Vice-Chairman Metal Workers Local 19 Louis Toscano Atlantic Former Senior Policy Advisor to 2006* Mayor James Whelen, Atlantic City/Retired James M. Gaymon, Jr. Gloucester Director Civic and Governmental 2010 Relations, Rowan University Ernest Coursey Atlantic Senior Policy Advisor to Mayor 2007 Lorenzo Langford, Atlantic City

* Holdover member.

-33- Authority County of Business Expiration Member Residence Affiliation Term Jeffery A. April, Esq. Cape May Attorney 2010 Virginia S. Bauer N/A Secretary/CEO, New Jersey Ex-Officio Commerce and Economic Growth Non-Voting Commission Member

Serving under the Authority's membership are the Executive Director and the various department heads. Senior staff of the Authority include:

Bart R. Mueller was appointed to the position of Executive Director of the Authority in January 2007. As Executive Director, Mr. Mueller is responsible for ensuring the traveling public is provided safe and efficient transportation. This is accomplished through the acquisition, construction, maintenance, operation and support of the expressway, airport, transit, parking and other transportation projects and services in the six counties served. Prior to serving as Executive Director, Mr. Mueller served as Deputy Executive Director from May 2005 to December 2006. Mr. Mueller was charged with restructuring the organization. This restructuring was implemented to make the Authority more efficient and responsive to the challenges of the Authority's expanding mission. He was also responsible for overseeing each department within the Authority. Mr. Mueller held the position of Program Director of Electronic Toll Collection and Transportation Services from April 2004 through May 2005. He was responsible for developing a business plan that regionalized and addressed the transportation needs of the counties within the Authority's domain. From July 2003 to April 2004, he served the Authority as the Program Manager for Electronic Toll Collection, overseeing the Authority's fiber optic based electronic toll collection system, including the E-ZPass“ and the then newly opened Express E-ZPass“ at the Pleasantville toll plaza. This "open road tolling" configuration was one of only three in the State. Mr. Mueller also represented the Authority as the Executive Committee member to the IAG and dealt with issues involving the customer service center for the Authority's E-ZPass“ transactions.

Prior to joining the Authority, Mr. Mueller served as the Director of Camden County Department of Parks, from July 2000 until July 2003, where he managed a high profile department consisting of three divisions: Parks, Environmental Affairs and Open Space/Farmland Preservation. Mr. Mueller was elected Camden County Surrogate from January 1996 until July 2000 and served as Judge of the Surrogate Court, Deputy Clerk of the Superior Court, Probate part.

In January 1996, Mr. Mueller retired from Bell Atlantic New Jersey after twenty-four and one half years service. Having risen from his initial hire in 1971 as a union lineman and cable splicer, Mr. Mueller progressed within the company, serving as Assistant Manager of Installation and Maintenance, Network Manager and Senior Network Analyst Specialist, Network Operations.

Governmentally, Mr. Mueller served the Borough of Oaklyn as Councilman, Director of Recreation and Director of Public Safety from 1977 until 1979, as well as Mayor from 1979 until 1987.

Dennis Culnan, Jr., was appointed to the position of Chief of Staff for the Authority in January 2007. He holds a Bachelor of Arts Degree in Political Science from Rider University. As Chief of Staff, he is responsible for high level planning and strategic implementation for the Authority. Mr. Culnan is charged with analyzing and developing recommendations on Authority matters including but not limited to legal, legislative and organizational issues, public involvement and community relations. Prior to this appointment, Mr. Culnan served the Authority as Senior Project Manager and Electronic Toll Collection Manager. In these positions Mr. Culnan was responsible the implementation of Express E-ZPass“, project management, traffic analysis, visitor statistics and overseeing the Authority's fiber optic based electronic toll collection system, including E-ZPass“ and Express E-ZPass“.

-34- Mr. Culnan is the Authority representative on the Executive Committee of the Inter-Agency Group and the Steering Committee for the I-95 Corridor Coalition.

Kathleen M. Sharman, CPA, was appointed Director of Finance for the Authority in February 1995 and Treasurer in July 1995.

Among her accomplishments at the Authority, Ms. Sharman has been responsible for crafting the Authority's first major toll increase in 30 years; for financing the Authority's share of the $330 million Connector Project; several other complex bond financing including a $204 million transportation system revenue bond issue, and overseeing the Authority's implementation of an E-ZPass® electronic-toll- collection back office interface.

She has also participated in the E-ZPass® Interagency Group (IAG), the consortium of toll agencies in the Northeastern United States that uses the E-ZPass® method of electronic toll collection. Over the past twelve years she has served on many IAG committees including finance, technical, legal, procurement and reciprocity. Currently, she serves as the IAG Procurement Committee Chair.

Ms. Sharman also serves as Chairperson for the International Bridge, Tunnel and Turnpike Association (IBTTA) Administration Committee. The IBTTA is an organization formed to facilitate sharing information among toll industry professionals. As Chairperson, she is responsible for the preparation and coordination of annual programs for the education of relevant financial and administrative functions for international industry members.

An honor graduate with a Bachelor of Business Administration degree from George Washington University in Washington, D.C., and a Certified Public Accountant, Ms. Sharman began her accounting and finance career at Arthur Anderson & Co.'s Washington, D.C. office. She went on to serve as controller for a mid-sized northern Virginia building and development company and then became Division Controller for Browning Ferris Industries, formerly, the world's second largest solid waste hauler.

As Director of Finance for the Authority, Ms. Sharman's specific responsibilities are to oversee the finance and administrative operations of the Authority, including accounting, procurement, grant administration, treasury, budget and financial reporting functions.

Wade Lawson currently serves as Deputy Executive for the Authority. Previously, Mr. Lawson was appointed Director of Tourist Services for the Authority in October 1996 after having served as Executive Director of ACTA since October 1988 and Director of Planning and Development since October 1992. He received a Bachelor of Arts degree with a concentration in Urban Affairs from the University of Pittsburgh in 1972 and a Masters of Public Administration degree from the University of Pittsburgh in 1976. He previously served as Vice President of the transportation division for Beacon Construction Company in Pittsburgh, Pennsylvania from 1984 to 1988. From 1983 to 1984 he served as Project Director with Morgan State University in Baltimore, Maryland and taught in its graduate school of transportation. From 1980 to 1982, he served as Executive Director for Central Contra Costa Transit Authority of Walnut Creek, California. Mr. Lawson was Director of Research and Planning with ATE Management & Service Company, Inc. in Dammam, Saudi Arabia from 1979 to 1980. He was Bureau Chief with the New Jersey Department of Transportation in Trenton from 1977 to 1979. Also in 1977, he was the Director of Systems Planning and Development with the Des Moines Metropolitan Transit Authority in Des Moines, Iowa. From 1974 to 1977 he was Program Coordinator with the Port Authority of Allegheny County, Pittsburgh, Pennsylvania.

Mr. Lawson oversees the Tourist Services Department that is responsible for Authority activities that most closely interact with the public. These include toll collection on the Expressway. The Department also helps to coordinate transportation planning with Atlantic City when major events are expected to lead to increased vehicular traffic.

-35- Kathleen C. Aufschneider currently serves as Deputy Executive Director and Director of Policy and Planning for the Authority. In this capacity she is responsible for business planning, economic development, legislative and policy matters, regional transportation planning and visioning for the Authority. She also oversees the Human Resources, Communications & Marketing and Information and Tolls Technology Directors.

Previously Ms. Aufschneider served as Chief Engineer for the Authority from 1997 to 2005, having responsibility for planning, design, and construction of all capital improvements on the Expressway and at the Airport. Her experience includes roadway, airfield, passenger terminal, parking, and building projects as well as intelligent transportation systems, and facilities maintenance.

Ms. Aufschneider is a Professional Engineer and Planner with 29 years of experience in transportation policy, planning and engineering. A 21 year veteran of the New Jersey Department of Transportation, she holds a BS in Civil Engineering and an MS in Transportation Planning and Engineering from Polytechnic Institute of New York and is a New Jersey Certified Public Manager.

Ms. Aufschneider currently serves on the WTS National Advisory Board and as Co-Chair for the WTS Philadelphia Scholarship Committee. She has been honored as 2002 Government Engineer of the Year by the ASCE New Jersey Section; as 2003 Woman of the Year by the WTS Philadelphia; and most recently as a 2004 Women of Influence by NJBiz.

Thomas Rafter has served as the Director of the Airport Division for the Authority since December 1994. Mr. Rafter attended Montclair State College where he studied Industrial Education. He is also an Accredited Airport Executive (A.A.E.) and is the Past President of the Northeast Chapter NEC/AAAE. He has worked at the Airport for the past twenty-four years. Mr. Rafter worked for Atlantic City as an Airport Maintenance Supervisor and Airport Manager before being hired by Pan Am World Services in the position of Terminal Manager and later as Deputy Director. He then joined the Authority in December 1992 as a Program Manager. Mr. Rafter is responsible for all matters of the Airport Division with specific focus on business and physical development activities to stimulate and accommodate increased traffic at the Airport.

Sharon Gordon is the Director of Communications and Marketing for the Authority. Her responsibilities include all Authority media and public relations. Much of her time is devoted to air service development among the existing carriers and attraction of new air carriers and new city destinations accessible from the Airport. Airline diversion assistance and the development of the ACY Customer Service Program are other support services provided through her department. All advertising, marketing initiatives and special events fall under the duties of the Director of Communication and Marketing for the Authority operators of the Expressway, Bus Management and the Airport.

Sharon Gordon's business career spans over 25 years in the State. Prior to joining the Authority she founded and served as president of Gordon Associates, a business development and government relations company. Ms. Gordon was recruited in 1995 by the Atlantic City Casinos and became Senior Vice President for the Casino Association of New Jersey. Her responsibilities included government relations, lobbying, special program development, economic impact studies and community relations.

She has a diverse background and extensive experience in public and governmental relations. Ms. Gordon was previously registered as a New Jersey Legislative Agent and provided testimony to state and federal committees on diverse issues. As a member of the Board of Directors for the National Association of Women's Business Owners she was recognized for the development and implementation of a National Procurement Project for Women Business Owners that brought about her Presidential Appointment to the President's Council on the Uniform Certification and Procurement Program.

-36- Ms. Gordon served as the Chairperson for the New Jersey Women's Business Advisory Council for three different gubernatorial administrations. She is a founding member of the Women's Agenda and New Jersey Legislative Agenda for Women (NJLAW). She is listed in Who's Who U.S. Executives. She was recognized and honored by the United States Small Business Administration as the "Women in Business Advocate of the Year for New Jersey".

Samuel L. Donelson has served as Director of Engineering and Chief Engineer for the Authority since May 2005 and has recently been promoted to Director of Engineering and Expressway Operations in June 2007. As such, he is responsible for the planning, design, and construction of all capital improvements on the Expressway and at the Airport. Mr. Donelson's experience includes roadway, tunnel, airfield, building and parking projects as well as intelligent transportation systems and facilities maintenance. Current projects underway include: aircraft apron design and construction, terminal reconfiguration and expansion, Express E-ZPass“ facility, overhead pedestrian bridge, major toll plaza renovation, several parking facilities and the planning and design of a 24-mile Expressway widening. Mr. Donelson is also responsible for the maintenance of all Authority facilities including toll plazas, maintenance yards, administration buildings, tunnel, snow and ice removal, fleet management, litter patrol, mowing and vegetation management, the Emergency Services Patrol and the Central Communications Center, which provides dispatch services for the New Jersey State Police as well as Authority operations.

Mr. Donelson is a Professional Engineer licensed in New Jersey and Pennsylvania and holds a BS in Civil Engineering from Temple University in Philadelphia. He also serves as the Vice-Chairman of the Engineering & Design Committee of the International Bridge, Tunnel and Turnpike Association (IBTTA).

Mr. Donelson has been with the Authority for 13 years and served previously as Deputy Chief Engineer. Prior to joining the Authority, Mr. Donelson worked in the private sector at an engineering design firm.

Carole Miller is the Director of Parking/Transportation Services for the Authority. Ms. Miller is responsible for the launch of many new transportation services for the Authority improving customer service delivery. Under Ms. Miller's direction new shuttle service was implemented at the Airport providing easy transport to and from the terminal building for airport passengers, especially those with special needs or traveling with small children. She oversees and manages all Authority parking operations maintaining sufficient staffing for all lots meeting the needs of the public and working with public agencies and the private sector to provide parking and shuttle transportation to and from designated locations. Ms. Miller is responsible for identifying grant opportunities with the support of NJ Transit for expanded transportation services not currently met by public transportation to aid in bringing the workforce to the workplace.

Ms. Miller served on the Transportation Council and has a diverse background in business and civic development that extends over a 30-year career with focus on program advancement through transportation initiatives that improve public access. She has achieved significant change in employment opportunities by promoting Welfare to Work programs still in place today. For 27 years she served as Vice Chair of the Camden County Planning Board, a former state Committee Woman of eight years and President of the Rotary Club for four years. Her contribution in business development continues as a Board member of the Alliance for Action where she continues to participate in many programs throughout southern New Jersey. Ms. Miller is also coordinator of United We Ride, Camden County.

Legal Authority and Purpose

The Authority was established under and pursuant to the Act as a public body corporate and politic with corporate succession and constitutes a political subdivision of the State established as an instrumentality exercising public and essential governmental functions. For the purpose of complying

-37- with Article V, Section IV, Paragraph 1 of the State Constitution, the Authority is allocated within, but is independent of any supervision or control by, the New Jersey Department of Transportation ("NJDOT"), except as provided in the Act. The purpose of the Authority is to provide for coordination of the region's transportation system and more particularly the highway system, aviation facilities and the transportation problems of South Jersey through the acquisition, construction, maintenance, operation and support of expressway and transportation projects, including, among other things, the Airport, and related economic development facilities. See "AUTHORIZED PROJECTS" herein. The Authority was created as the successor to the Expressway Authority and ACTA.

Powers of the Authority; State Oversight

The Act provides that the powers of the Authority are vested in the voting members thereof in office. Five (5) voting members of the Authority shall constitute a quorum and action may be taken and motions adopted by the Authority at any meeting by the affirmative vote of at least five (5) members, unless in any case the by-laws of the Authority shall require a larger number.

The Act requires that a true copy of the minutes of every meeting of the Authority shall be delivered by and under the certification of the secretary thereof to the Governor. No action taken at such meeting by the Authority shall be effective until the earlier of (a) fifteen (15) days (exclusive of Saturdays, Sundays and public holidays) after such copy of the minutes shall have been so delivered, or (b) the approval thereof by the Governor. If during said fifteen (15) day period the Governor returns such copy of the minutes with a veto of any action taken by the Authority or any member thereof at such meeting, such action shall be null and void and of no effect.

The Act states that no resolution or other action of the Authority providing for the issuance of bonds, notes, refunding bonds or other obligations or for the fixing, revising or adjusting of tolls, fares or charges for the use of any project or parts or sections thereof shall be adopted or otherwise made effective by the Authority without the prior approval, in writing, of the Governor and either the State Treasurer or the Director of the Division of Budget and Accounting in the State Department of the Treasury (collectively, "State Officers").

The 2007 Note Resolution was approved by the State Officers on or before June 19, 2007.

The Act further provides that the powers conferred upon the Governor, the State Treasurer and the Director of the Division of Budget and Accounting in the State Department of the Treasury shall be exercised with due regard for the rights of the holders of bonds of the Authority and nothing in, or done pursuant to, the provisions of the Act conferring such powers shall in any way limit, restrict or alter the obligations or powers of the Authority or any representative or officer of the Authority to carry out and perform in every detail each and every covenant, agreement or contract at any time made or entered into by or on behalf of the Authority with respect to its bonds or for the benefit, protection or security of the holders thereof. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES – State Agreements With Bondholders" herein.

The Act authorizes and empowers the Authority, as successor to the Expressway Authority, to be the owner and operator of the Expressway. The Authority acquired ownership of the Expressway on December 17, 1992. The Act further authorizes and empowers the Authority, as successor to ACTA, to be the owner and operator of all transportation and parking facilities and all other property owned by ACTA. The transfer of ownership of ACTA's property to the Authority occurred on October 1, 1992.

The Authority is authorized to issue its bonds or notes, from time to time, for any of its corporate purposes, including the refunding of Outstanding obligations issued by it or any predecessor authority. The Authority may issue such types of bonds or notes as it may determine, including bonds or notes on which the principal and interest are payable (a) exclusively from the income and revenues of the project

-38- financed with the proceeds of such bonds or notes; (b) exclusively from the income and revenue of certain designated projects whether or not they are financed in whole or in part with the proceeds of such bonds; or (c) from its revenues generally.

The Act permits the Authority to fix, revise, charge and collect tolls, fares, passenger facility charges and other charges, including reduced fare or charge programs, for the use of each project and the different parts or sections thereof, which tolls, fares and charges are to be fixed and adjusted so as to effectuate the purposes of the Act including assisting in the funding of projects and to carry out and perform the terms and provisions of any contract with or for the benefit of holders of bonds or notes. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES - Rate Covenant" herein.

The Act provides that the Authority shall not be required to pay any taxes or special assessments upon any of its projects or any property acquired or used by it under the provisions of the Act, or upon the income or revenue therefrom.

In connection with the Airport, the Act also states that the Authority may enter into agreements with municipalities surrounding the Airport to provide for the reimbursement of such municipalities for costs incurred in providing services to the Airport.

AUTHORIZED PROJECTS

The Act authorizes the Authority to acquire, construct, maintain, operate, repair, improve and support expressway projects and transportation projects in South Jersey.

The following table summarizes the characteristics of Expressway Projects and the Transportation Projects and the facilities and services included thereunder as such terms are defined in the Act and the Resolution.

Expressway Projects See definition in Section entitled "INTRODUCTION – Authority Projects" herein.

Transportation Projects See definition in Section entitled "INTRODUCTION – Authority Projects" herein.

Definition of terms relating to Authority Projects:

Transportation Facility See definition in Section entitled "INTRODUCTION – Authority Projects" herein.

Parking Facilities See definition in Section entitled "INTRODUCTION – Authority Projects" herein.

Public Transportation Facility See definition in Section entitled "INTRODUCTION – Authority Projects" herein.

Public Transportation Service Rail passenger service, motorbus regular route service, paratransit service, motorbus charter service and marine passenger service.

Economic Development Facility Any area, place, building or other improvement or structure related to, connected with, or in the vicinity of, a Transportation Project which may serve the users of that Project or assist in, enhance or stimulate its operation or development.

-39- The Expressway and the Connector are Expressway Projects as defined in the Act. See "ATLANTIC CITY EXPRESSWAY" and "ATLANTIC CITY/BRIGANTINE CONNECTOR" herein. The enlargement and improvement of the Airport is specifically designated as a Transportation Project under the Act.

In addition, the Authority, as successor to ACTA, has acquired and has become the operator of all facilities owned or operated by ACTA, including the New York Avenue Parking Garage in Atlantic City. The ACTA facilities and functions (as described below) are Transportation Projects under the Act.

The Act also authorizes the Authority to establish a plan for the management, control and regulation of motorbus regular route services and motorbus charter services in South Jersey. Such a plan may provide for the designation of certain routes for such motorbus services, the regulation of the manner of travel to points of loading and unloading, the regulation of bus activities incident to arrival at and departure from places of business, especially casino hotels, the requirement that buses entering Atlantic City or any other municipality in which casino gaming is authorized, park at a parking facility owned, operated or approved by the Authority, the licensing of motorbuses and the regulation of parking, repair and maintenance facilities. However, the Authority's regulation of repair and maintenance facilities is only permitted to the extent necessary to assure that such facilities are not operated as parking facilities. Certain privately-owned parking, repair and maintenance facilities in existence as of February 1, 1983 may be excluded from coverage by the Act.

Pursuant to the Act, the Authority promulgated regulations with respect to motorbus regular route and motorbus charter service in South Jersey. Such regulations include the implementation of charges on the operators of such services.

ATLANTIC CITY EXPRESSWAY

Facilities

Atlantic City Expressway

General. The Expressway is an existing limited-access toll road, opened for traffic in stages during 1964 and 1965, having its western terminus at the North-South Freeway (New Jersey Route 42) near Turnersville in Camden County and its eastern terminus in Atlantic City, a distance of about 44.5 miles. Currently, the Expressway has fourteen (14) interchanges. The design of a new interchange will be funded as part of the 2007 Capital Projects with a portion of the proceeds of the 2007 Notes. There are barrier toll plazas where all vehicles pay tolls at Egg Harbor (Mile 18) and at Pleasantville (Mile 4.5). Tolls also are collected on ramps at seven of the interchanges.

The Expressway consists of dual roadways separated by a median strip generally 40 feet wide to provide for safe separation of opposing traffic. It contains two eastbound lanes between Interchanges 44 (Turnersville) and Interchange 31 (New Jersey Route 73). There are three eastbound lanes from Interchange 31 to Atlantic City (Mile Post 0). The Expressway has three westbound lanes from Atlantic City (Mile Post 0) to the Garden State Parkway Interchange (Mile Post 8) and two westbound lanes for the rest of the roadway. The design speed of the Expressway for most of its length is 70 miles per hour, but the posted speed limits are 65 miles per hour from Mile Post 44 through Mile Post 8 and 55 miles per hour from Mile Post 8 to Mile Post 0. Maximum horizontal curvature on the main roadway is 4 degrees and the maximum grade is three percent (3%); minimum stopping sight distance on the main roadway is 600 feet. The pavement consists of plant mixed asphalt macadam, supported by a natural bank-run gravel on compacted soil, with a self-draining system of drain pipe and other selected materials where required. Concrete pavement with concrete or steel structural construction was used on all bridge and overhead crossings.

-40- The only major bridge structure of the Expressway is a 0.3 mile long, six lane bridge across Beach Thorofare (Intracoastal Waterway), which separates Atlantic City (located on the Island of Absecon) from the mainland. This bridge, known as the McGahn Bridge, has a vertical clearance over the navigation channel of 35 feet above mean high water and a horizontal clearance of 80 feet between abutments. In addition, there are 32 bridges carrying the Expressway over other roadways or waterways, and 23 bridges carrying other roadways over the Expressway.

Federal law mandates biennial bridge inspections for bridges and culverts with a clear span of 20 feet or more. The State's bridge inspection and rehabilitation programs are handled by the NJDOT which reports to the Federal Highway Administration. Such bridge and culvert inspections, as well as maintenance, are performed by Expressway maintenance personnel or outside contractors selected through the competitive bidding process.

The Expressway also contains a 780 space surface intercept parking lot ("Intercept Parking Lot") which is located just east of the Pleasantville Toll Barrier within the median of the Expressway. Atlantic City casinos rent spaces in the parking lot for their employees who transfer to shuttle buses to travel to their places of employment. At the eastern end of the intercept lot, there is a visitor's center that is operated by the Atlantic City Convention and Visitors Authority. There are two concession/rest areas on the Expressway. The one known as the "Farley Service Plaza" is located west of Interchange 17, at Mile Post 21 on a 500-acre site between the eastbound and westbound lanes of the Expressway. The facilities available, which have been leased to various operators, include a fast food restaurant, a gasoline service station and a New Jersey Tourist Information Center. The building housing the fast food restaurant has recently been replaced with a new state-of-the-art building which allows for improved flow of patrons. In addition, the administration offices for the Authority are located at the Farley Service Plaza as well as a building that houses the Expressway's 24/7 New Jersey State Police operation and command center. A second service area is located just east of the Pleasantville toll plaza in the Intercept Parking Lot. The facilities available are a gasoline service station and convenience store.

The Authority has permits to erect outdoor advertising structures and to provide public service messages and traffic control along the Expressway. At the current time, the Authority derives income from the leasing of various sites for outdoor advertising structures. On May 12, 2003 Governor McGreevey signed Executive Order 59 which imposed a 120-day moratorium on the approval of any permits for new signs on outdoor advertising structures, and on the sale or lease of any existing outdoor advertising structures, owned, operated or controlled by a State authority. In addition, Executive Order 59 set up a task force to review issues concerning outdoor advertising structures (also known as "billboards") on State property. After the report of the task force, the Governor signed Executive Order 66 which continued the moratorium in order to give the State Legislature an opportunity to enact appropriate legislation. In 2004 the moratorium was lifted and the Authority was able to renegotiate expiring lease agreements for more favorable terms as well as recover retroactive lease increases that could not be implemented during the moratorium. No statement can be made as to the likelihood of any future State initiatives, legislative or otherwise, to regulate billboards on State property.

Terminals, Interchanges and Connecting Roads. In Atlantic City, the Expressway currently terminates two blocks from the Atlantic City Boardwalk ("Boardwalk"). Inbound traffic is discharged onto Missouri Avenue and the Connector. Outbound traffic exits from Arkansas Avenue and the Connector. Pacific Avenue, Arctic Avenue and Baltic Avenue provide additional distribution to and from the Expressway.

At the Garden State Parkway (Interchange 7), Expressway traffic destined for Cape May County shore communities enters the Parkway southbound. Parkway traffic traveling south to Atlantic City from northern New Jersey and New York enters the Expressway at Interchange 7.

-41- In addition to local destinations, Interchange 9 serves the Airport via Delilah Road and Tilton Road. Nine other interchanges connect to highways serving Camden, Gloucester and Atlantic Counties and beyond.

Approaching Camden and Philadelphia, the western terminus of the Expressway (Interchange 44) connects to the 6-lane limited-access North-South Freeway (New Jersey Route 42). The North-South Freeway has interchanges with I-295, and the Walt Whitman Bridge and Benjamin Franklin Bridge (I-76 and I-676), which cross the Delaware River into Philadelphia.

Toll Collection Facilities. The Authority has nine (9) toll collection locations over the entire length of the Expressway. The type of facility and location are as follows:

Type of Toll Facility Location

Ramp...... Interchange 41 Berlin Cross Keys Road Ramp...... Interchange 38, Williamstown (Winslow Twp.) Ramp...... Interchange 33, Winslow Ramp...... Interchange 28, Hammonton Barrier ...... Mile Post 18, Egg Harbor (Hamilton Twp.) Ramp...... Mile Post 12, Mays Landing (Hamilton Twp.) Ramp...... Interchange 9, Delilah Road (Egg Harbor Twp.) Ramp...... Interchange 5, Route 9 Barrier ...... Mile Post 4.5, Pleasantville

The two barriers and the Interchange 9 ramp collect tolls from traffic moving in both directions. The other ramps collect tolls from one direction only. Interchanges 5, 28, 33, 38 and 41 collect to and from the West. Interchange 12 collects tolls to and from the East. All vehicles using the Expressway must pass through one or more toll lanes.

Electronic Toll Collection

In May 1995, the Authority entered into an agreement with MFS Network Technologies, Inc. for the design and implementation of an Electronic Toll Collection and Traffic Management System ("ACE ETTM System"). The system became operational for certain vehicles, including New Jersey Transit busses, in July 1997. E-ZPass“ became available as a method of payment on the Expressway on November 11, 1998.

The ACE ETTM System allows users to pay tolls at toll collection facilities without stopping to exchange tickets or money by using their E-ZPass“ transponders and E-ZPass“ accounts as a method of payment. The system uses computers to record toll transactions, making errors less likely and allowing for real-time traffic management. Transactions are recorded in the lanes and sent daily to the E-ZPass“ Customer Service Center. The transactions are then processed by the Customer Service Center. Customer's accounts are debited for the toll due and the payment is then remitted to the Authority. E- ZPass“ is accepted as a method of payment on over twenty (20) toll road agencies in the Northeast between Massachusetts and West Virginia. Currently, approximately fifty-one percent (51%) of all toll transactions on the Expressway are transactions through the ACE ETTM System using E-ZPass“ as a method of payment.

Effective as of August 2, 2002, the Authority, the New Jersey Turnpike Authority and the New Jersey Highway Authority (collectively, the "NJ Agencies") entered into a Professional Services Agreement ("ACS Agreement") with ACS State & Local Solutions, Inc. ("ACS") pursuant to which ACS agreed to provide certain remediation services for the Electronic Toll Collections ("ETC") System for the NJ Agencies and to operate and maintain the ETC System for the NJ Agencies, as well as to operate and

-42- maintain the customer service center ("CSC") and the violations processing center ("VPC"), for the toll roadways operated by the NJ Agencies until July 31, 2012, unless the ACS Agreement is earlier terminated in accordance with its terms.

ACS began operating and maintaining the CSC and the VPC for the toll roads operated by the NJ Agencies on or about March 25, 2003. The Authority participates in the CSC/VPC portion of the contract and, pursuant to the ACS Agreement, ACS invoices the Authority on a monthly basis for 3.6% ("Authority Percentage") of all amounts due with regard to those services ("CSC Services") pertaining to establishment, operation and maintenance of the Customer Service Center, including the portion of the CSC to be used for the processing of toll collection violations. Payments made by the Authority under the ACS Agreement constitute Operating Expenses of the Expressway Project payable from Revenues prior to Debt Service on the Bonds.

The ACS Agreement was amended, as of May 20, 2004, to: (a) reflect the consolidation of the New Jersey Highway Authority into the New Jersey Turnpike Authority which took place on July 9, 2003; and (b) add the Delaware River Port Authority as a member "Agency" to which ACS would provide services under the ACS Agreement. As a result of this amendment, the Authority Percentage described above and used to determine the amount to be invoiced by ACS to the Authority will, in certain instances, be reduced from 3.6% to 3.3%.

The Express E-ZPass“ Project, financed with a portion of the 2004 Series A Bonds, has accomplished the physical separation of E-ZPass“ traffic (electronic toll tag holders) from those vehicles that must stop at the toll plaza to pay cash. The first phase of the Project involved roadway widening; the addition of one (1) toll lane; demolition of three (3) toll booths, including their equipment and concrete islands; relocation of telecommunications and utilities; construction of concrete barriers to separate traffic; and super elevation and paving of the express lanes. The first phase of the Project has been completed and the Express E-ZPass“ toll lane opened on May 6, 2004. The second phase of the Project involved the construction of an enclosed pedestrian bridge (walkway) to allow toll personnel to cross the divided highway from the administration building on the south side of the highway to the toll booths on the north side of the highway through a walkway which houses mechanical and electronic toll collection equipment accessed by elevators and stairways on both ends. The second phase of the Project has been completed and use of the second phase of the Project commenced July 2006.

Traffic Patterns

The Expressway is used for several types of travel: local travel by drivers with residences, work or shopping locations near the Expressway and recreational travel to the casino hotels in Atlantic City and to the shore communities in Cape May and Atlantic Counties.

Traffic volumes vary significantly between the winter base level and the summer peaks. The average daily traffic for July and August at the Egg Harbor toll barrier is about one hundred thirty-nine percent (139%) of its annual average daily traffic ("AADT"). The average daily traffic for July and August at the Pleasantville toll barrier is about one hundred fourteen percent (114%) of its AADT.

Annual auto volumes at the Pleasantville toll barrier are significantly greater than those at Egg Harbor because of the year-round travel to the casinos at Atlantic City. The annual bus volume at Pleasantville is double the bus volume at Egg Harbor for the same reason. Truck traffic at Egg Harbor is higher than at Pleasantville because Atlantic and Cape May Counties are supplied from the Camden- Philadelphia area rather than from northern New Jersey and New York.

Table 1 on the following pages shows monthly total toll-paying vehicles for the period 1998 through 2006 at the Egg Harbor toll barrier and at the Pleasantville toll barrier.

-43- Table 1 Atlantic City Expressway Toll Barriers Monthly Toll-Paying Vehicles, Two-Way 1998-2006

EGG HARBOR TOLL BARRIER

Percent Percent Percent Percent Percent Percent Percent Percent Change Change Change Change Change Change Change Change 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006

January 1,003,763 -12.7% 876,223 1.0% 884,860 8.7% 961,568 8.6% 1,044,054 3.1% 1,076,327 4.5% 1,125,050 1.9% 1,146,072 11.1% 1,273,176

February 954,603 -5.1% 905,898 7.7% 975,888 -1.5% 960,863 11.7% 1,073,001 14.5% 916,904 34.1% 1,229,835 -6.9% 1,144,803 3.8% 1,188,559

March 1,137,265 -9.8% 1,025,408 6.5% 1,092,503 2.2% 1,116,278 13.4% 1,266,074 1.3% 1,282,913 3.5% 1,328,360 3.9% 1,380,394 4.2% 1,437,758 -44- April 1,147,521 -2.4% 1,120,296 1.9% 1,141,141 6.9% 1,219,580 4.6% 1,276,090 1.3% 1,293,022 10.3% 1,426,788 -0.5% 1,420,135 5.3% 1,494,896

May 1,461,465 -5.9% 1,375,521 -0.7% 1,365,232 2.3% 1,396,900 11.3% 1,554,929 -1.7% 1,528,221 12.1% 1,713,444 -0.9% 1,697,308 0.6% 1,706,987

June 1,560,661 -3.2% 1,510,954 5.1% 1,588,588 3.8% 1,649,129 10.3% 1,819,213 -2.9% 1,767,356 3.4% 1,827,505 6.2% 1,940,077 -3.2% 1,877,407

July 2,002,218 -6.0% 1,882,040 1.9% 1,918,680 5.1% 2,017,019 3.6% 2,088,821 4.9% 2,191,233 1.5% 2,224,663 3.5% 2,301,453 -2.0% 2,255,550

August 1,987,136 -8.6% 1,815,826 1.0% 1,834,404 8.8% 1,995,961 6.0% 2,116,529 6.6% 2,257,003 -4.2% 2,162,763 2.0% 2,205,623 2.2% 2,253,279

September 1,442,572 -9.3% 1,308,701 6.2% 1,389,771 2.4% 1,422,632 3.7% 1,474,865 2.3% 1,508,915 10.0% 1,659,700 -0.9% 1,644,095 0.0% 1,643,524

October 1,204,919 -2.6% 1,173,798 1.6% 1,192,988 0.8% 1,202,215 4.9% 1,261,575 7.9% 1,361,431 3.1% 1,403,635 -0.3% 1,399,364 2.9% 1,439,378

November 1,080,571 -4.1% 1,036,298 0.5% 1,041,621 8.8% 1,133,804 2.8% 1,165,245 9.2% 1,272,653 0.0% 1,272,578 2.6% 1,305,800 3.7% 1,354,309

December 909,702 7.0% 972,986 -3.2% 941,742 17.1% 1,102,569 -0.4% 1,098,442 4.3% 1,146,028 8.0% 1,238,099 1.3% 1,254,595 6.0% 1,329,406

Total 15,894,394 -5.6% 15,005,948 2.4% 15,369,418 5.3% 16,178,518 6.6% 17,238,838 2.1% 17,602,006 5.7% 18,612,420 1.2% 18,839,719 2.2% 19,254,229 ______Source: The Authority. Table 1 (continued) Atlantic City Expressway Toll Barriers Monthly Toll-Paying Vehicles, Two-Way 1998-2006

PLEASANTVILLE TOLL BARRIER

Percent Percent Percent Percent Percent Percent Percent Percent Change Change Change Change Change Change Change Change 1998 1998-1999 1999 1999-2000 2000 2000-2001 2001 2001-2002 2002 2002-2003 2003 2003-2004 2004 2004-2005 2005 2005-2006 2006

January 1,789,239 -14.4% 1,532,183 2.0% 1,562,158 4.9% 1,639,168 13.4% 1,858,618 -2.7% 1,808,118 0.5% 1,816,828 0.6% 1,827,175 10.3% 2,015,719

February 1,729,669 -10.8% 1,542,911 8.9% 1,680,623 -3.6% 1,620,176 16.4% 1,886,524 -14.8% 1,607,881 20.0% 1,928,734.00 -1.8% 1,894,555 2.0% 1,932,387

March 1,919,913 -10.0% 1,727,706 1.4% 1,752,421 3.9% 1,821,252 14.0% 2,075,734 -1.8% 2,038,458 -5.3% 1,930,254 7.8% 2,080,965 6.5% 2,215,707 -45- April 1,867,732 -3.9% 1,795,643 -2.6% 1,749,201 5.9% 1,851,644 6.4% 1,969,310 -0.1% 1,967,084 -0.4% 1,958,662 7.8% 2,111,822 3.6% 2,187,467

May 2,060,804 -6.4% 1,929,839 -1.4% 1,902,065 2.1% 1,941,118 10.4% 2,143,374 -0.2% 2,138,307 0.8% 2,155,409 3.9% 2,239,191 3.4% 2,315,949

June 2,051,548 -6.9% 1,909,483 -0.3% 1,903,703 2.5% 1,951,106 13.7% 2,217,828 -1.8% 2,178,212 -1.3% 2,150,088 4.6% 2,248,950 4.6% 2,351,451

July 2,305,140 -5.9% 2,169,840 0.5% 2,181,743 0.8% 2,199,454 9.1% 2,400,496 2.7% 2,464,482 0.9% 2,486,271 5.3% 2,618,367 -3.2% 2,534,737

August 2,305,831 -5.6% 2,176,567 -2.0% 2,133,821 8.2% 2,308,075 4.9% 2,420,100 3.8% 2,512,201 -1.8% 2,467,355 1.8% 2,511,614 3.9% 2,608,799

September 1,989,577 -8.2% 1,826,558 4.0% 1,899,398 1.0% 1,919,249 7.4% 2,062,060 -1.0% 2,041,485 5.4% 2,151,750 -2.0% 2,109,352 7.5% 2,266,751

October 1,933,132 -2.9% 1,877,024 -1.8% 1,844,110 2.4% 1,889,154 5.0% 1,984,457 4.0% 2,064,481 -1.8% 2,027,974 3.1% 2,091,127 2.4% 2,141,754

November 1,841,812 -4.6% 1,756,365 -2.6% 1,710,268 10.4% 1,887,754 0.0% 1,888,640 1.8% 1,921,980 -0.7% 1,907,578 4.9% 2,001,640 2.4% 2,049,855

December 1,523,821 -8.9% 1,659,162 -4.2% 1,589,240 19.0% 1,890,527 -4.6% 1,802,629 -1.3% 1,778,341 9.9% 1,953,963 1.4% 1,980,983 3.4% 2,048,108

Total 23,318,218 -6.1% 21,903,281 0.0% 21,908,751 4.6% 22,918,677 7.8% 24,709,770 -0.8% 24,521,030 1.7% 24,934,866 3.1% 25,715,741 3.7% 26,668,684 ______Source: The Authority. Rates and Charges

The Expressway opened on July 31, 1964 as a toll road connecting the Philadelphia metropolitan region with Atlantic City. The roadway was designed with two barrier toll plazas, one near Egg Harbor Township and one in the City of Pleasantville, both in Atlantic County, New Jersey, and four tolled interchanges. Minor toll rate adjustments were made from time to time between 1964 and 1972 by the Expressway Authority.

In November, 1998 a new toll rate schedule was approved by the Authority's Board of Commissioners in order to raise necessary additional revenue while minimizing the impact of a toll increase on South Jersey residents and other frequent users of the Expressway. This objective was achieved by creating three tiers of rates, the highest being for infrequent Expressway users who pay their tolls with cash, the middle for occasional users of the E-ZPass“ System and the lowest being for frequent users of the E-ZPass“ System. On August 12, 2003 the Authority adopted a revised schedule of toll charges for (i) regional (occasional) users of the E-ZPass“ System equal to 10% discount from tolls charged to cash payers and (ii) frequent users of the E-Z Pass“ System equal to a 20% reduction in the discount rate in effect prior to August 12, 2003. On January 17, 2007 the Authority eliminated the 10% regional (occasional) user E-ZPass“ discount. (See Table 2 Expressway Toll Rate Schedule.)

Pursuant to the Act, certain vehicles may use the Expressway without paying a toll: any motorbus operated by the State, county or municipality on motorbus regular route service or any ambulance, first-aid or emergency-aid vehicle, vehicular fire-fighting apparatus, or similar vehicles, operated for the benefit of the public by the State or any county or municipality, or charitable or non- profit corporation or organization, first-aid squad, emergency squad or fire company of the State.

Table 2 on the following page sets forth the schedule of vehicle classifications and tolls for the Expressway for the indicated periods.

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-46- Table 2 Expressway Toll Rate Schedule E-ZPass E-ZPass E-ZPass Regional Frequent Regional Frequent Regional Frequent E-ZPass User E-ZPass User E-ZPass User Toll Location Classification Cash Rate Rate Discount Rate Discount Rate Discount 11/30/1998 (Before (Before 8/12/03 to 8/12/03 to 1/17/2007 1/17/2007 to Present 8/12/03) 8/12/03) 1/17/07 1/17/07 to present to present Pleasantville Auto $0.50 $ 0.33 $ 0.30 $ 0.45 $0.34 $ 0.50 $0.34 Limo 1.00 0.75 0.50 0.90 0.60 1.00 $0.60 Dual Tire 1.00 0.66 0.66 0.90 0.90 1.00 $0.90 Three Axle 1.50 1.00 1.00 1.35 1.35 1.50 $1.35 Four Axle 2.00 1.50 1.50 1.80 1.80 2.00 $1.80 Five Axle 2.50 2.00 2.00 2.25 2.25 2.50 $2.25 Six Axle 3.00 2.50 2.50 2.70 2.70 3.00 $2.70

Egg Harbor Auto 2.00 1.30 1.10 1.80 1.28 2.00 1.28 Limo 3.00 2.00 1.50 2.70 1.80 3.00 1.80 Dual Tire 3.00 2.66 2.66 2.70 2.70 3.00 2.70 Three Axle 4.50 3.00 3.00 4.05 4.05 4.50 4.05 Four Axle 6.00 4.50 4.50 5.40 5.40 6.00 5.40 Five Axle 7.50 6.00 6.00 6.75 6.75 7.50 6.75 Six Axle 9.00 7.50 7.50 8.10 8.10 9.00 8.10

Route 9 (Exit 5) Auto 0.50 0.33 0.30 0.45 0.34 0.50 0.34 Truck/Bus/Limo 0.50 0.50 0.50 0.50 0.50 0.50 0.50

Pomona (Exit 9) Auto 0.50 0.25 0.25 0.45 0.30 0.50 0.30 Truck/Bus/Limo 0.50 0.50 0.50 0.50 0.50 0.50 0.50

May's Landing (Exit 12) Auto 0.50 0.25 0.25 0.45 0.30 0.50 0.30 Truck/Bus/Limo 0.50 0.50 0.50 0.50 0.50 0.50 0.50

Hammonton (Exit 28) Auto 0.50 0.25 0.25 0.45 0.30 0.50 0.30 Truck/Bus/Limo 0.50 0.50 0.50 0.50 0.50 0.50 0.50

Winslow (Exit 33) Auto 0.50 0.25 0.25 0.45 0.30 0.50 0.30 Truck/Bus/Limo 0.50 0.50 0.50 0.50 0.50 0.50 0.50

Williamston (Exit 38) Auto 0.25 0.20 0.10 0.22 0.15 0.25 0.15 Truck/Bus/Limo 0.25 0.25 0.25 0.25 0.25 0.25 0.25

Berlin-Cross Keys (Exit 41) Auto 0.25 0.20 0.10 0.22 0.15 0.25 0.15 Truck/Bus/Limo 0.25 0.25 0.25 0.25 0.25 0.25 0.25 ______Source: The Authority.

-47- Toll Revenues and Vehicles

Table 3 on the following page shows the Expressway Authority's and the Authority's revenues from tolls, the number of vehicles traveling on the Expressway, and average toll revenue per vehicle from its opening in 1964 for each calendar year through 2006.

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-48- Table 3 Atlantic City Expressway Annual Toll Traffic and Revenues Toll Calendar Toll Toll Revenue Year Traffic Revenue(1) Per Vehicle 1964(2) 1,014,548 $ 741,668 $.73 (Expressway not fully opened) 1965 4,007,164 2,253,755 .56 (Expressway fully opened only 1966 6,096,547 3,268,444 .54 part of year) 1967 6,380,080 3,616,908 .57 1968 6,773,838 4,005,455 .59 1969 7,270,137 4,356,523 .60 1970 7,764,570 4,691,374 .60 1971 8,032,007 4,794,179 .60 1972 8,161,724 4,892,070 .60 1973 8,732,426 5,394,473 .62 1974 7,585,840 4,665,643 .62 1975 7,986,995 4,902,620 .61 1976 8,843,662 5,436,684 .61 1977 9,826,579 6,019,869 .61 1978(3) 12,245,975 7,240,020 .59 1979(3) 15,383,322 8,576,921 .56 1980(3) 19,988,359 11,126,831 .56 1981(3) 23,894,730 13,084,174 .55 1982 26,650,882 14,514,182 .54 1983 30,286,240 16,441,044 .54 1984(3)(4) 35,253,091 18,394,014 .52 1985(3) 35,665,732 18,991,386 .53 1986 37,037,486 19,587,547 .53 1987(3) 39,836,484 21,357,481 .54 1988 42,298,412 22,475,047 .53 1989 43,905,047 22,977,015 .52 1990(3) 45,035,072 22,939,345 .51 1991 43,113,761 22,169,148 .51 1992 44,901,487 22,779,560 .51 1993 46,262,939 23,429,336 .51 1994 48,023,048 24,218,471 .50 1995 47,602,146 24,257,677 .51 1996 46,243,612 23,932,905 .52 1997 49,290,846 25,056,325 .51 1998(5) 50,855,587 27,444,172 .54 1999 48,050,179 44,434,942 .92 2000(6) 50,619,351 44,322,412 .88 2001(7) 54,415,354 45,853,899 .84 2002(8) 59,000,044 48,525,003 .82 2003(3)(9) 60,332,338 51,190,087 .85 2004 63,036,743 57,247,412 .91 2005 64,594,708 57,970,661 .90 2006 66,820,291 59,477,706 .89

Notes: (1) Not including income from service area rentals, investments and other sources. (2) Expressway opened for traffic on July 31, 1964. (3) Casinos in Atlantic City opened as follows: Resorts International, May 1978; Caesar's Boardwalk Regency, June 1979; Bally's Park Place, December 1979; Sands, August 1980; Harrah's, November 1980; Golden Nugget, December 1980 (presently Bally's Grand); Atlantis, April 1981 (operating as Trump's World Fair Casino); Claridge, July 1981; Tropicana, November 1981 (presently TropWorld); Trump Plaza, May 1984; Trump's Castle, June 1985; Showboat, March 1987; Trump Taj Mahal, April 1990; and Borgata, July 2003. (4) Toll ramp opened at Interchange 9, Delilah Road, in August 1984. (5) First toll increase since 1972 implemented November 30, 1998. See Table 2 "Expressway Toll Rate Schedule" above. (6) Toll Interchange 41, Berlin-Cross Keys Road, opened May 2000. (7) Connector opened July 2001. (8) Toll Interchange 5 (Route 9) opened March 2002. (9) E-ZPass“ discount rate adjustment August 12, 2003.

Source: The Authority. -49- ATLANTIC CITY/BRIGANTINE CONNECTOR

General

The Connector was opened on July 31, 2001. The Connector is a 2.3 mile long limited access roadway that connects the eastern terminus of the mainline Expressway with the Brigantine Bridge. Vehicles on the Connector have direct access to the Convention Center, the Marina District of Atlantic City where the Trump Marina Hotel/Casino, Harrah's Hotel/Casino and the Borgata Hotel, Casino & Spa are located, the Uptown District of Atlantic City as well as the City of Brigantine Beach located on the island north of Atlantic City.

There are a series of eight ramps that allow Connector traffic to access the points described above as well as midtown Atlantic City via Mississippi Avenue. Thus, the Connector allows traffic to circulate between midtown Atlantic City, the Convention Center, the Uptown and Marina Districts and the City of Brigantine Beach.

A section of the Connector is a 2,000 foot tunnel with state of the art safety sensors and equipment monitored on a 24/7 basis at a traffic operations center located at the State Police building in the Farley Service Plaza.

CRDA Agreements

In connection with the development and financing of the Connector, the Authority entered into a series of agreements with the CRDA, a public body corporate and politic, constituting an instrumentality of the State. The principal agreement between the Authority and CRDA is the Parking Fee Agreement dated October 10, 1997, as amended ("Parking Fee Agreement"). Subject to the terms and conditions of the Parking Fee Agreement, as amended to March 8, 2005, CRDA has agreed to pay to the Authority a portion of the statutory parking fees generated from certain casino parking facilities in the Marina District of Atlantic City ("Marina District") used in conjunction with any new Marina Hotel (as defined in the Parking Fee Agreement) ("Marina Parking Fees"). The maximum amount payable by CRDA under the Parking Fee Agreement is an amount sufficient to amortize $67,566,510 of the 1999 Bonds issued to finance the Connector.

The Marina Parking Fees payable to the Authority under the Parking Fee Agreement, if any when received, constitute Revenues under the Resolution and are therefore pledged to the payment of the Bonds. The amount of Marina Parking Fees which the Authority may receive pursuant to the Parking Fee Agreement, if any, is dependent upon numerous factors, including, but not limited to, the success of the gaming industry in the Marina District and the continued development of the Marina District.

CRDA's payment obligations to the Authority pursuant to the Parking Fee Agreement are subject to the prior lien of CRDA's Revenue Bonds, Series 2005A and Series 2005B (Federally Taxable) (collectively, the "Senior Lien Bonds"). CRDA has advised the Authority that as of May 7, 2007, the principal amount of the Senior Lien Bonds outstanding is $286,990,000. The final maturity of the Senior Lien Bonds is January 1, 2025. CRDA may issue additional Senior Lien Bonds subject to its meeting certain coverage requirements and subject to the prior written consent of the Authority.

The Borgata Hotel and Casino in the Marina District opened July 3, 2003. The Authority has received $10,150,046 in Marina Parking Fees, representing the Authority's share of Marina Parking Fees from that hotel collected by CRDA through December 31, 2006.

The Authority and CRDA have also entered into the CRDA Pledge Agreement pursuant to which CRDA has pledged and agreed to pay to the Authority the amounts to be received by CRDA as a donation from a casino licensee as to which MGM/Mirage is or will become a holding company and certain other

-50- casino licensee(s) operating a casino hotel in the Marina District ("Donors"), in each case if and when such Donors become casino licensees, in an aggregate amount equal to the initial issuance amount of the Special Revenue Bonds plus the equivalent of interest thereon at a rate per annum equal to the CRDA Tax Exempt Rate from each delivery date of the Special Revenue Bonds to the date of their repayment. The amount of each Donor's donation shall be applied as a credit against such Donor's respective Atlantic City non-housing investment alternative tax obligations. The Special Revenues are a Governmental Grant which do not constitute Revenues under the Resolution, and the Special Revenue Bonds are not payable from or secured by the Revenues.

TRANSPORTATION PROJECTS

Facilities

General

On October 1, 1992, the Authority assumed all of ACTA's functions, which included the following: operation of the New York Avenue Parking Garage (which includes related office and commercial space in Atlantic City), Bus Management, Automobile Parking, Traffic Management, and Transportation Planning in Atlantic County. The New York Avenue Parking Garage has been designated as a General Project under the Resolution. The New York Avenue Parking Garage and the Bus Management functions are sources of Revenue.

New York Avenue Parking Garage

The New York Avenue Parking Garage is located on New York Avenue between Atlantic and Pacific Avenues in Atlantic City approximately 1½ blocks from the Boardwalk. The Authority purchased the New York Avenue Parking Garage on December 17, 1992.

The New York Avenue Parking Garage consists of six levels, including the roof and ground floor, and contains 825 parking spaces for cars in a combination parallel and sloping floor (double helix) configuration. Motorists exit from the New York Avenue Parking Garage onto New York Avenue. The New York Avenue Parking Garage has a total area of 270,575 square feet, including 13,800 square feet of leasable office and retail space. All retail and office facilities are located on the ground level. The Authority also maintains offices at the New York Avenue Parking Garage facility.

Parking facilities at the New York Avenue Parking Garage are marketed to various casino properties, local business firms, and government agencies for employee and patron parking. The Authority currently has contracts for automobile garage parking ranging from one (1) to three (3) year terms at prices ranging from $68.00 for 5 days per week to $87.00 for 7 days per week.. Daily rates at the New York Avenue Parking Garage range from $3.00 for up to two hours to $7.00 for a maximum of 24 hours. Currently, the garage has a peak capacity usage of approximately 84%. During the summer months this percentage increases to approximately 95%.

Before returning to their vehicle, patrons pay for their parking at an Auto Pay Station in the first- floor lobby of the New York Avenue Parking Garage. These machines accept cash or a valid credit card and (if requested) issue a receipt. The machine validates the ticket and returns it to the patron. At the exit, the patron inserts the validated ticket into a ticket reader, which opens the gate. Patrons may also take advantage of ticketless parking by inserting a valid credit card at the entrance and again at the exit. The machine will calculate the fee, charge the card, issue a receipt and open the gate. As of November 18, 2005, the Authority began accepting E-ZPass“ Plus at the New York Avenue Parking Garage as an alternative means of payment.

-51- Atlantic Avenue Surface Parking Lot

The Atlantic Avenue Surface Parking Lot is bounded by Atlantic, Missouri, Mississippi and Arctic Avenues in Atlantic City and has approximately 300 spaces. Parking rates range from $4.00 per day for weekday parking to $11.00 per day for event parking. As of April 15, 2006, the Authority began accepting E-ZPass“ Plus at the Atlantic Avenue Surface Parking Lot as an alternative means of payment.

Fairmount Avenue Surface Parking Facility

This project involved the construction of an asphalt parking lot along Fairmount Avenue in Atlantic City for approximately 425 vehicles which opened in July 2004. The parcel of land is situated between Georgia and Mississippi Avenues. The work included grading excavation, asphalt paving and striping, the installation of lighting, curb, sidewalk and landscaping. Parking rates range from $4.00 per day for weekday parking to $6.00 per day for weekend parking.

Bus Management

The Bus Management program involves the management, control and regulation of casino-related bus activities in Atlantic County. The program designates specific routes of travel which casino buses are authorized to use and ensures the orderly flow of bus traffic in Atlantic County.

The Authority generates revenue from the Bus Management program by charging permit fees to bus companies for each bus serving both casino and non-casino facilities in Atlantic County.

Traffic Management

The Traffic Management function involves working with other governmental entities and the private sector to develop and implement various transportation management strategies within Atlantic County. To date, these efforts have concentrated on automobile and casino bus traffic oriented towards Atlantic City and ground traffic at the Airport.

Transportation Planning

The Authority is the administrative arm of the South Jersey Transportation Planning Organization ("SJTPO"). SJTPO's function is to develop and coordinate transportation programs for urbanized areas in the Counties of Atlantic, Cumberland, Cape May and Salem in order to encourage and promote the development of intermodal transportation systems that maximize mobility and minimize air pollution. Transportation Services

Effective January 1, 2004, the Authority acquired and assumed the operation of the "Comprehensive Transportation System" in Camden and Gloucester Counties, previously operated by the Camden County Improvement Authority. The Comprehensive Transportation System includes (i) the transportation needs of Work Force New Jersey and Temporary Assistance To Needy Families ("TANF") recipients, post-TANF recipients, welfare clients, low income individuals, and other transit dependents, (ii) the operation of a Job Access/Reverse Commute Program in Camden County, (iii) a partnership with New Jersey Transit to provide local shuttle motor bus passenger service in and around Camden County, and (iv) transportation services for residents of Gloucester County to and from the Pureland Industrial Park from Westville and Woodbury, Gloucester County.

The Authority's Transportation Services Division runs shuttles to work, a shuttle service for veterans to medical providers and parking facilities in Atlantic City, connected to the Walk and The Quarter at the Tropicana, the Sands Hotel & Casino and the Convention Center by an Authority shuttle.

-52- The Transportation Services Division also operates parking lots at the Airport and a free, continuous shuttle to and from the terminal.

Factors Affecting Revenues From Transportation Projects

Set forth below are certain factors, among others, that could affect revenue from the Transportation Projects. Such factors should not be considered definitive or exhaustive.

Competition. In recent years, the casino industry has changed its philosophy regarding employee parking by taking necessary steps to bring employees to on-site parking facilities or to locations that are as close as possible to each casino site. The demand for parking has increased in spite of the loss of casino employee parking revenue as the Boardwalk Hall and Convention Center have opened. The Authority anticipates that demand will increase further with the development of "The Walk" retail center and the increase of convention traffic.

Legislation. The federal, State and local governments could pass legislation specifically regulating or limiting the use of automobiles, the availability of fuel, and the parking of automobiles within Atlantic City, or providing incentives for remote parking and the use of mass transit.

Regulation. The continued viability of the New York Avenue Parking Garage, Bus Management and Automobile Parking functions of the Authority are directly dependent upon the operation of casino gambling in Atlantic City. Changes in the New Jersey Casino Control Act and related regulations of the Casino Control Commission have a direct impact on the business of casinos which, in turn, may have an impact upon the future revenues of the Authority from these functions.

Compliance with Environmental Permit. The New Jersey Department of Environmental Protection issued a revocable Coastal Area Facility Permit ("Permit") for construction of the New York Avenue Parking Garage. The Permit required that certain air quality and traffic flow conditions be met during and after construction. Since matters of air quality and traffic flow are beyond the control of the Authority, there can be no assurance that the conditions to issuance of the Permit will continue to be met or that certain modifications may not be imposed by the NJDEP upon traffic flows which could affect the operation of the New York Avenue Parking Garage and the other functions of ACTA assumed by the Authority.

AIRPORT

Facilities

General. The Act specifically designates the Airport as a Transportation Project. The Airport is comprised of approximately 5,000 acres and is located off the Delilah Road exit, Interchange 9, on the Expressway. The Airport is situated approximately ten (10) miles northwest of Atlantic City. The expansive Airport site is situated within three supportive municipalities: Egg Harbor, Hamilton and Galloway Townships in Atlantic County, New Jersey. A number of structures, some dating back to World War II days, are located within the Airport. Among the well known major structures are the Civil Terminal Building (acquired with the 83.6 acres described below), the FAA Technical Center's Technical and Administration Building, the FAA's Hangar, the Control Tower, and the New Jersey Air National Guard "Ready" and Maintenance Hangars. In addition, the United States Coast Guard maintains a helicopter base and the Department of Homeland Security maintains a Federal Air Marshall National Training Facility at the Airport.

On September 24, 1992, the Authority acquired from Atlantic City the Civil Terminal Area of the Airport which covers approximately 83.6 acres of the Airport and is located in Egg Harbor Township, New Jersey. The sale was accomplished pursuant to an Agreement of Sale between Atlantic City and the

-53- Authority dated July 31, 1992 ("Acquisition Agreement"). The Civil Terminal Area is the only portion of the Airport owned by the Authority, except as noted below.

The Authority also acquired Atlantic City's reversionary interest in approximately 4,312 acres of the Airport located in Egg Harbor, Hamilton and Galloway Townships in Atlantic County which Atlantic City previously sold to the United States of America and which the FAA administers. The reversionary interest means that ownership of the property may revert to the Authority if the United States determines that it has no use of the Airport for governmental purposes. Upon such reversion, the Authority must agree to operate the Airport as a public airport for the useful life of the Airport facilities.

Certain proceeds from the New Jersey Transportation Trust Fund Authority were used to acquire the Civil Terminal Area as permitted by the Act. The Act permits the Authority to enter into contracts, leases or other agreements with any federal, State or local government or governmental agency, including the FAA, regarding the acquisition, construction, maintenance, operation and support of Airport areas within and beyond the Civil Terminal Area.

On April 15, 1998, the FAA leased approximately 2,100 acres of land to the Authority to operate and develop for a period of 50 years and subsequent 50 year extensions as negotiated by both parties. Based on this lease and a cooperative agreement with the FAA, the Authority will maintain and operate the runways and taxiways system of the Airport. See "AIRPORT – Operations – Airport Federal Regulation" herein.

Airport Facilities. The Airport has two runways, one of which is of a length sufficient to handle all three major users of the Airport, namely, the FAA, commercial and general aviation operators, and the National Guard, which is a major lessee of the United States of America, leasing two separate parcels totaling approximately 300 acres. The runway, designated Runway 13-31, is 10,000 feet long and can accommodate and land any size, weight commercial or cargo aircraft. The Airport is a designated alternate landing site for the NASA space shuttle. The second or "crosswind" runway is 6,144 feet long. This runway, designated Runway 4-22, can accommodate smaller aircraft and regional jets that are primarily for commuter and general aviation operations. Adequate taxiways exist connecting the two runways with the two National Guard areas, the FAA area and the Civil Terminal Area.

The Civil Terminal Area has approximately 20 acres of paved and lighted aircraft circulation and parking apron, including an approximate 10 acre expansion that was completed in July 1993. The existing aircraft apron adjacent to the terminal building can accommodate a mix of jet and regional/commuter aircraft with the typical arrangement consisting of a combination of up to six jets and four regional/commuter planes.

Aviation users of the Civil Terminal Area have the right to use the runways, landing areas, airport traffic control services, air navigation aids and related facilities operated by the Authority subject to the payment of reasonable fees. Such users also have the right to use the roadways connecting the Airport to the public highways. They have the further right of ingress and egress between the Civil Terminal Area and other portions of the Airport using such runways, taxiways, ramps and aprons as the FAA may direct.

Terminal Facilities/Services. The Civil Terminal Building is a two-story building and contains approximately 110,000 square feet. It houses a public waiting and circulation area, a ticketing and ticketing back office area, a baggage claim area, departure/arrival hold rooms for eight (8) Gates and Airport administration offices. The Civil Terminal Building also contains various concessions including a restaurant, ground transportation counters and a gift/newspaper shop in the public waiting area. The ground transportation services available at the Airport include rental car companies, taxi and shuttle operations.

The Civil Terminal Building was constructed in the early 1960's. An addition to the ticketing/waiting area was completed in 1989.

-54- In 1996 a second story with waiting areas, restaurant, loading bridges, and seven gates were added nearly doubling the size of the terminal building. A third addition of 10,000 square feet was opened in May 2004. In 2001, the surfaces of the main runway (13-31) and associated parallel taxiway were completely rehabilitated at a cost of approximately $17 million. Also during 2001, the Authority constructed a new entrance road, commercial vehicle drive lanes and a 1,400 space surface parking lot and implemented paid parking ("Airport Surface Lot").

While the focus of 2002 was on security with an upgrade to the fence line and other systems, the entire airfield electrical and lighting system was also rehabilitated. In 2002 through 2003, construction was completed on a 35,000 square foot snow equipment storage facility and approximately $2 million in snow removal equipment was purchased. In an effort to move forward with the long-range development of the Airport facilities, an Environmental Impact Statement was completed in October 2003. Approval of this document by the FAA cleared the way to proceed with the implementation of the terminal area capital development.

In the 2005-2006 timeframe, a 300 seat hold room was constructed which increased capacity and improved passenger boarding areas. This project also included construction of administrative offices which made additional rental space available. Construction of a new taxiway was also complete which will allow for future aircraft apron and terminal expansion.

In 2006 new security improvements were started in the terminal including an Interim Baggage Screening Facility, baggage conveyor system, renovations of the existing airline ticket offices, expansion of the TSA passenger screening and new directional flow within the terminal. These improvements will be completed in 2007.

Airport Parking Garage Project. A multi-level parking garage containing approximately 1,400 spaces is currently under construction in front of the passenger terminal at the Airport ("Airport Parking Garage Project"). The Airport Parking Garage Project is being constructed where a portion of the Airport Surface Lot is currently located. In order to accommodate the displacing of vehicles during construction of the Airport Parking Garage, the Authority extended the existing surface parking capacity by approximately 1,200 spaces. The Airport Parking Garage Project was financed with the proceeds of the 2006 Bonds which constitute "Airport Bonds" under the Resolution.

Operations

Airline Services. The Airport's civil aviation services include scheduled jet service, charter jet and air taxi service, and fixed based operator ("FBO") service to commercial and general operators.

The number of scheduled air service carriers and their daily operations vary from time to time. Currently, there are two scheduled air service carriers, consisting of Atlantic Southeast Airlines (Delta Connection) and Spirit. These airlines provide approximately 74 weekly departures with an average of 296 monthly flights to eight nonstop markets, including Atlanta, Las Vegas, Myrtle Beach and several Florida cities. Spirit connects to San Juan, Punta Cana, Cancun and many other destinations in the Caribbean. In 2006, Atlantic City International Airport serviced 948,336 passengers.

In July 1, 1996 the Airport established a presence of the U.S. Customs Service. The U.S. Customs Service now has a user fee arrangement with the Authority to clear international flights at the facility.

During 2006, daily scheduled and charter flights at the Airport averaged over fifteen (15) with activity heavier in the summer months.

-55- At this time, Midlantic Jet Aviation ("Midlantic") services both aircraft owners and passengers at the Airport. These services include ground handling of aircraft, fueling, aircraft maintenance, parking, registration and collection of landing and parking fees.

Midlantic operates from a $2 million maintenance hangar and has completed construction of a second hangar. Raytheon Aircraft Services ("Raytheon") completed construction of a major jet maintenance facility at the airport in March 1999. This $6 million facility was Raytheon's primary maintenance facility in the Northeast, and offered repairs to all makes of business aircraft including mid- size jets and Beechcraft aircraft. In 2006 Midlantic acquired the Raytheon hangar and facility.

Operating Agreement. The Civil Terminal Area is currently operated and maintained with staffing from Macquarie Aviation North America 2 ("MAVNA").

The term of the MAVNA Operating Agreement was five (5) years, terminating on March 31, 2006. The SJTA plans to issue an RFP for the renewal of these services. MAVNA is currently operating under a month to month agreement requiring 60 days notice in the event that their contract is terminated.

One of the responsibilities of MAVNA is to employ personnel to carry out the operation of the Airport. These personnel of the Airport are therefore employees of, and subject to, MAVNA and its employment practices.

The Authority maintains twenty-four (24) hour Aircraft Rescue and Fire Fighting ("ARFF") services. The personnel of the ARFF service are Authority employees.

Airport Regulation. The entire Airport area is located in an environmentally-sensitive area and is subject to the jurisdiction of the New Jersey Pinelands Commission. The operation of the Airport is subject to the FAA and its regulations. See "OPERATIONAL FACTORS - Regulatory Considerations and Environmental Considerations" herein. In this regard the FAA recently completed an Environmental Impact Statement ("EIS"). In conjunction with this work, the Authority and the Pinelands Commission have entered into a Memorandum of Agreement. See "OPERATIONAL FACTORS - Regulatory Considerations - Pinelands Commission" herein.

Airport Federal Regulation. Under 49 U.S.C. §47107(b)(1), the use of revenues generated by a public airport is limited to the capital or operating costs of (i) the airport; (ii) the local airport system; or (iii) "other local facilities owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property. In February 1999, the Federal Aviation Administration ("FAA") published its Final Policy and Procedure Concerning the Use of Airport Revenue ("Final Policy"). The Final Policy was established pursuant to 49 U.S.C. §47107(l) to enforce Federal requirements against "illegal airport revenue diversion" and assure that "airports be as self- sustaining as possible", in order to ensure that airports are not diverting resources to their sponsoring governments by making payments for which they do not receive equivalent value in return and that airport revenues — which are defined very broadly — are used for airport purposes. The Final Policy articulates various fee levels which should be generated from airport users and lessees of airport facilities. The FAA has the power to withhold funds under existing airport grants or approvals or funds for future airport grants in order to enforce the Final Policy and can withhold Federal transportation funds from the parent governing body if it does not reimburse the airport for revenue diversion violations. In addition, NJDOT has the authority to obtain civil penalties from the parent governing body up to three times the amount of diverted revenues. Accordingly, Airport Revenues are not available to be applied generally as Revenues under applicable law.

-56- Traffic/Use

History. Airport passenger traffic is directly impacted by the number of airline seats, type of aircraft and cities offered to the market. Since 1992, when the Airport was purchased by the Authority, passenger traffic increased in response to more seats and new air service introduced and decreased as a result of a change in airline service or change in aircraft equipment that reduced the number of seats or cities served. When seats go into the market they get filled and in years where passenger traffic decreased, it was directly related to changes made by the air carriers. Upgrades to the Airport facility provided for better schedule utility by the airlines and better accommodations for air travelers evidence by the number of passengers in 1998 which exceeded one million for the first time in the history of the Airport.

The September 11, 2001 tragedy had a negative impact on air travel throughout the world and the Airport had 8.18% or 74,001 fewer passengers in 2001 than in 2000. The year 2002 was a re-building year for all airports, including the Airport which quickly experienced near 2000 levels as compared to the recovery of other airports of similar size and service. Passenger traffic for 2006 is approximately 3% less than the total passenger count for 2005. This anomaly is likely a direct result of Spirit Airlines changing out their fleet from aging MD 80’s to more efficient and new A319’s and A320’s. For a brief period of time seat capacity was reduced and evidenced by the negative change in passenger traffic, however, during the fleet change-out all load factors on all flights increased, most to full capacity. By the end of the third quarter 2006, seat capacity was restored and the market reacted immediately. The market continues to respond and grow. In 2007, scheduled service passenger traffic has increased 29% as of April 30, 2007 compared to April 30, 2006. Spirit passenger traffic increased 39% through April 30, 2007 compared to April 30, 2006. On May 3, 2007, Spirit inaugurated daily non-stop service to Las Vegas finally connecting the two world renowned gaming resorts. In May 2007, the Airport offered 15 direct flights per day to 11 other cities.

Table 4 Airport Passengers 1992-2006

Year Total Passengers Scheduled Service Charter Service 1992 903,965 524,818 379,147 1993 884,492 490,030 394,462 1994 817,753 432,998 384,755 1995 737,436 360,815 376,621 1996 753,375 351,880 401,495 1997 893,542 509,955 383,587 1998 1,031,435 695,160 336,275 1999 1,001,473 691,632 309,841 2000 904,150 632,691 271,459 2001 830,149 602,135 228,014 2002 900,538 699,008 201,530 2003 1,002,470 819,678 182,742 2004 1,050,172 857,649 192,523 2005 980,477 777,862 202,615 2006 948,336 732,635 215,701 ______Source: The Authority.

Scheduled vs. Charter Service. Market demand is the basis for the increase in Charter Air Service, as the Atlantic City entertainment industry expands it presents a need to expand the market base from outer markets from beyond the usual drive market. The Atlantic City entertainment industry has made significant capital investments through additional hotel towers adding more rooms, retail and dining attractions to the destination. Charter air service is a proven way to bring patrons from other venues to a new experience in their respective Atlantic City properties. Charter flights offer the gaming properties the flexibility of implementing unique marketing programs to cities not served at the Airport through scheduled service.

-57- There is a high level of confidence in the growing entertainment and business community in the Atlantic City area, evidenced by the recent purchase of a 20 acre beachfront site for casino development by Wall Street’s Morgan Stanley. With three new additional casino properties under design and development, advancing scheduled air service has become a priority for the industry to achieve consistent connectivity from new and distant markets. Scheduled service has increased 29% during the first four months of 2007 along with an increase in charter air service indicating the maturity of the area in supporting a mix leisure and business travel. Spirit launched direct non-stop service to Las Vegas early May of 2007 and the first flight was oversold, subsequent flights indicate a quick ramp up of service and strong load factors for service less than one month in operation. With the capital investment of an additional $6 Billion underway, scheduled air service has become an important factor in remaining competitive and preserving the industry’s billions in capital investments.

It is expected that as more scheduled air service is introduced bringing additional cities and frequencies to the Airport market the charter flights contracted to serve those cities will be re-directed to new destinations not currently served by scheduled airline service. For example; if the Airport were to attract scheduled service to Chicago, those charter flights for Chicago may be re-routed to another city outside of the Airport service route. Charter service helps establish top market demand for future development of scheduled air service by existing carriers and in attracting new air carriers.

Key Factors Affecting Airline Traffic. Key factors which affect airline traffic at the Airport include (1) the population, travel characteristics and economic trends of the Airport service area, (2) national and international conditions, (3) airline economics and airfares, (4) the availability and price of aviation fuel, (5) airline service and route networks, (6) the capacity of the air traffic control system, and (7) the capacity of the Airport itself.

The impacts of September 11, 2001 have required significant changes in airport security. During 2002, the Transportation Security Administration took over responsibility for passenger screening and implemented procedures to screen all checked baggage. While the results of September 11, 2001 have had a negative impact on most airports, the Airport has had a significant increase in passenger traffic. The inconveniences and long lines created at major airports through new regulations has made regional airports like the Airport more attractive to customers. Although required to meet the same regulations, the available capacity to process passengers at the Airport has resulted in more expeditious passenger security processing compared to some competing airports.

HISTORICAL OPERATING RESULTS

2002 Through 2006 Historical Operations

Table 5 below reflects revenues and operating expenses for the component functions of the Authority for the years 2002 through 2006. The information in the table is derived from the Authority's audited financial statements. Financial statements for the year ended December 31, 2006 of the Authority, together with the report of Ford, Scott, Seidenburg & Kennedy, L.L.C. thereon, are presented in APPENDIX A hereto.

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-58- Table 5 Actual Operations in 2002-2006 ($000's) 2002 2003 2004 2005 2006 Revenues Tolls $48,533 $51,190 $57,247 $57,971 $59,477 Concessions 1,656 1,681 1,958 1,963 2,047 Subtotal 50,189 52,871 59,205 59,934 61,524 System Proceeds 201 42 - - - Rentals 2,043 1,801 4,209 3,652 3,790 ETC Administrative 1,480 1,624 1,492 CRDA Parking Fees - 711 2,938 3,653 2,847 Intercept Parking 651 610 633 501 351 Auto Surface and Garage Parking 900 1,098 903 956 1,291 Bus Parking and Management - - - - Bus Permit Fees 440 413 396 367 344 ESP Revenue - 179 291 180 - Airport 4,447 4,354 4,613 6,358 7,277 Grants – SJTPO 1,453 1,703 1,882 2,179 1,832 Transportation Services 1,748 1,989 2,098 Grants – FEMA 262 - Other 960 1,130 502 613 830 Total Operating Revenues 61,284 64,912 79,062 82,006 83,676 Less: Airport Revenues 4,447 4,354 4,613 6,358 7,277 Less: Grants - SJTPO 1,453 1,703 1,882 2,179 1,832 Less: Transportations Services 1,748 1,989 2,098 Less: FEMA Reimbursement 262 - - Plus: Interest Revenues 1,310 1,199 1,013 1,063 1,573 Total Available Revenues 56,694 60,054 71,570 72,543 74,042 Total Operating Expenses, net of Depreciation 37,693 43,080 50,364 55,040 58,896 Less: Grants – SJTPO 1,453 1,703 1,882 2,179 1,832 Less: Transportations Services 1,748 1,989 2,098 Less: FEMA Reimbursement 262 - - Less: Other Required Deposits (Subordinated Debt Fund ETC Expense) 946 - - - - Less : General Project Expenses: NY Parking Garage Expense 366 329 376 586 750 Airport Expense 5,166 5,464 7,024 8,603 9,333 Pledged Project Operating Expenses 29,762 35,584 39,072 41,683 44,883 Net Revenues 26,932 24,470 32,498 30,860 29,159 Debt Service 15,171 14,650 14,528 16,608 16,775 R&R Deposit 0 State Payment 2,500 2,500 2,500 2,500 2,500 Parking Garage Expenses -General Project 366 329 376 586 750 Airport Subsidy-General Project 719 1,110 2,411 2,245 2,056 Other Required Deposits (Subordinated Debt ETC Expense) 946 550 0 0 Available for Capital or Other Authority Purposes 7,230 5,331 12,683 8,921 7,078

Debt Service Coverage 1.78x 1.67x 2.24x 1.86x 1.74x Debt Service Coverage 100% test 1.37x 1.28x 1.64x 1.41x 1.32x Debt Service Coverage 7.08(a)(2) 1.26x 1.20x 1.34x 1.24x 1.20x

______Source: The Authority; derived from Authority audited Financial Statements. Detail may not add to totals due to rounding.

-59- Management's Discussion of Historical Operating Results

Net Revenues have increased by 8% over the five year period from $26.9 million in 2002 to $29.1 million in 2006. From 2002 to 2006, Total Operating Revenues of the Authority increased from $61.2 million to $83.6 million, a 36.5% increase, while Total Pledged Project Operating Expenses, net of depreciation increased from $29.7 million to $44.8 million, an increase of 50%. Since 2002, the Authority has successfully implemented several projects, which include:

x The opening of one new interchange x Reconstruction of the service station at Farley Service Plaza x Completed Construction of a Snow Equipment Building at the ACY x Completed Huron Ave. U-Turn x Completed the Express E-ZPass“ Project

Careful management of new projects and initiatives, recurring expenses, and development of additional revenue generating sources, enabled the Authority to maintain balanced financial operations. The following discusses the trends in each major revenue and expense category.

Revenues

Tolls. Toll revenue increased 23% from 2002-2006. Traffic volume increased 13.3% during this period in conjunction with the opening of the Route 9 Interchanges as well as increased activity at the renovated Boardwalk Hall, favorable summer weather and vacations taken closer to home following the events of September 11th and the opening of the Borgata in July 2003. On August 12, 2003, the Authority implemented an E-ZPass“ rate adjustment. This rate adjustment combined with a 4.5% increase in toll paying traffic generated an additional $6 million in toll revenue for 2004 over toll revenue in 2003. Traffic growth of 3.5% accounted for the increase in toll revenue from 2005 to 2006.

Concessions. During the 2002-2006 period, revenues increased 24% due to the Authority's contracts at the Farley Service Plaza. Construction of a new restaurant at the Farley Service Plaza began early in 2003. The new restaurant was completed and opened to the public in September 2003. The opening of this new facility was largely responsible for the 17% increase in concession revenue from 2003 to 2004.

Rentals. The largest item in this category is Billboards. The steady and consistent increases in income up until 2002 were primarily a result of the construction and rental of billboards along the Expressway. In 2003 billboard revenues were relatively flat due to the State of New Jersey's Executive Order # 59, which placed a moratorium on any sales, leases, permits, or construction of any new billboards on state owned property. In 2004 the moratorium was lifted and the Authority was able to renegotiate expiring lease agreements for more favorable terms as well as recover retroactive lease increases that could not be implemented during the moratorium.

ETC Administrative Revenue. This represents the Authority's share of revenue collected from the E-ZPass“ customer service center for customer account maintenance as well as miscellaneous fees.

Intercept Parking. The Authority continues to see a decline in these revenues due to the changes in CAFRA laws that allowed casinos to reduce the number of employee parking spaces off-site. Additionally the number of spaces available for lease has decreased from 1300 to 350 spaces as a result of the opening of the Visitor Welcome Center in September 2000 as well as the increase in available parking for casino employees in Atlantic City.

Auto Surface and Garage Parking. The Authority opened up a surface lot at Mississippi Avenue in Atlantic City in 2002 and opened the Fairmont Avenue surface lot in 2004. Revenues have increased 44% over the 2002-2006 period.

-60- Bus Permit Fees. Revenues have declined 22% over the five year period as bus companies continue to consolidate. Authority Bus Permit Regulations (instituted in 1996) give fleet operators the option to purchase annual medallions for a lump sum price. Additionally, annual visit trips to the casinos by bus have declined 22% over the period. These trips have been replaced by automobile trips as total annual visit trips from all modes of transportation have increased by 4% from 2002 to 2006.

Marina Parking Fees. During the 2004-2006 period, $10,150,046 in parking fees were received from CRDA under a 1997 Parking Agreement relating to the construction of the Connector. Payment of these fees is subordinate to certain payments on CRDA's $291,670,000 Revenue Bonds, Series 2005.

Emergency Service Patrol ("ESP") Revenue. This represents grant income from the Federal Highway Administration which provided funds to start up the first two years. This partially offset the cost of maintaining the seven day a week, 24 hours a day, Expressway ESP.

Airport. These revenues increased 64% from 2002 to 2006. The Civil Terminal Area is currently operated and maintained with staffing from MAVNA. The Authority receives all revenue from the Civil Terminal and pays all expenses associated with operating the Civil Terminal, including a management fee paid to MAVNA. The increase in Airport revenue between 2002 and 2004 resulted from many new initiatives developed to encourage scheduled air service to accommodate increased passenger demand. The increase in Airport revenue in 2005 and 2006 resulted from the Authority taking over surface parking operations on April 1, 2005.

On April 15, 1998 the Authority entered into a lease and cooperative agreement with FAA's William J. Hughes Technical Center relating to certain land facilities and equipment at the Airport. Under the terms of this agreement, the Authority has the power to set rates and charges at the Airport. Currently, the Authority is operating under the Rates and Charges Resolution adopted June 25, 2002. Prior to 1998, Johnson Controls operated the Airport under a use and occupancy agreement.

Under 49 U.S.C. §47107, Airport revenues are not available to be used for the Authority's operating or capital expenses related to non-Airport facilities or for debt service on debt not related to the Airport. As a result, Airport Revenues are segregated from the Operating Revenues available under the pledge of the Resolution. See "AIRPORT – Operations – Airport Federal Regulation."

Grants. SJTPO Grant revenues and related expenses are comprised primarily of advances and reimbursements received by the Authority from the regional transportation planning organization, the SJTPO. The Authority is reimbursed for all expenses relating to the SJTPO. Grants are not included in Revenue under the Resolution. The annual amount of such grants is deducted from Operating Revenues and Pledged Project Operating Expenses.

Transportation Services Grant Revenues result from the acquisition of the "Comprehensive Transportation System" from the Camden County Improvement Authority during 2004. Effective January 1, 2004, the Authority acquired and assumed the operation of the "Comprehensive Transportation System" in Camden and Gloucester Counties, previously operated by the Camden County Improvement Authority. The Comprehensive Transportation System includes (i) the transportation needs of the Work Force New Jersey and Temporary Assistance To Needy Families ("TANF") recipients, post-TANF recipients, welfare clients, low income individuals, and other transit dependents, (ii) the operation of a Job Access/Reverse Commute Program in Camden County, (iii) a partnership with New Jersey Transit to provide local shuttle motor bus passenger service in and around Camden County, and (iv) transportation services for residents of Gloucester County to and from the Pureland Industrial Park from Westville and Woodbury, Gloucester County. Program expenses are funded entirely by grants from various public agencies and operating agreements with local business entities. Operating revenues have increased by 19.8% over the three year period from $1.7 million in 2004 to $2.1 million in 2006. Operating expenses have increased by 40.6% over the three year period from $1.6 million in 2004 to $2.3 million in 2006.

-61- Other. These revenues consist of miscellaneous sources such as payments under various agreements with CRDA and the Atlantic City Convention and Visitors Authority, insurance refunds from a retrospective rating policy, and miscellaneous employee reimbursements.

Interest Revenues. Investment earnings increased in 2006 due to an increase in short term rates and an increase in the Construction Fund balance as proceeds from the 2006 Transportation System Revenue Bonds being used to finance the parking garage at the airport remain on deposit during 2006.

Pledged Project Operating Expenses

The Expressway operating expenses, net of depreciation, are comprised of Expressway maintenance and toll operations, State Police costs, insurance, administration, and tourist services. Over the five-year period from 2002 to 2006, total Expressway Operating Expenses increased by 53.3%. Areas in which expenses increased include, but are not limited to, E-ZPass“ system expenses, which, as of March 25, 2003, were reclassified as Pledged Project Operating Expenses and also registered increases due to increased use of the system and cost increases, a regional marketing program, which was funded through the increase in billboard revenues, and increases in State Police, and implementation of various safety initiatives following the events of September 11, 2001.

Total payroll and payroll-related expenses comprise the majority of all Expressway operating accounts. Other major expenses include police and security, which has increased due to federal and state regulations enacted since 2001.

Four types of expenses are deducted from Total Operating Expenses in Table 5 to arrive at the Operating Expenses of Pledged Projects, which are payable prior to funding of debt service on Bonds. These four expenses are (i) costs that are funded by planning grants (SJTPO), (ii) the operating expenses of the New York Avenue Parking Garage, (iii) operating expenses of the Airport and (iv) costs that are funded by grants resulting from the Transportation Services Program.

Debt Service

Amounts in Table 5 represent payments each year on the Authority's Outstanding Bonds, presently consisting of the 1999 Bonds, the 2003 Bonds, the 2004 Bonds and 2006 Bonds.

Other Expenditures

R&R Deposit. The Authority maintains a balance of $6 million in the R&R fund established under the resolution. No deposits have been made during the period 2002 to 2006. This was consistent with the Consulting Engineer annual certification that the $6 million balance maintained in the Rehabilitation and Repair Fund was sufficient for any extraordinary Expressway Costs. The Rehabilitation and Repair Fund was established in order to provide funds for each Pledged Project (i) to restore or prevent physical damage to each such Project, (ii) for the safe and efficient operating of each such Project, and (iii) to prevent loss of Revenues generated by such Project(s).

State Payment. Each year the Authority has paid $2.5 million to the State pursuant to the agreement entered into in 1983 between the Authority (as successor to the Expressway Authority) and the NJDOT.

New York Avenue Parking Garage Expenses. The operating expenses of this General Project are payable from the General Reserve Fund and have increased during the period 2002 through 2006.

-62- Airport Subsidy. These amounts represent the difference between the Airport's revenues and operating expenses and are payable as a General Project from the General Reserve Fund of the Authority. The subsidy has increased from 2002-2006 due to revenue losses and increased initiatives implemented following the events of September 11, 2001, including increased advertising, security patrol (24 hours per day, 7 days per week) as well as introduction of new surface parking and rehabilitation of the main runway at the Airport. In addition, beginning in 2002, State and local authorities began charging the Authority for police service that had previously been provided at no cost. The subsidy decreased in 2006 due to the success of a full year operation of surface lot parking facility.

CAPITAL PLAN

Pursuant to Section 35(B) of the Act, the Authority annually develops a business plan that includes a capital budget and capital plan for submission to and approval by the New Jersey Commissioner of Transportation ("Commissioner"). The Commissioner must approve or disapprove the capital plan and capital budget within 15 working days of its receipt. The Commissioner may provide for amendments to the capital budget and capital plan. The Authority may not expend or obligate any funds with respect to the capital budget until the Commissioner approves it. The following table summarizes the Authority's capital plan for 2007 through 2011 adopted on February 21, 2007. The capital plan is an estimate of future capital needs and may be revised significantly over time.

2007 - 2011 Capital Plan

Category 2007 2008 2009 2010 2011 TOTAL EXPRESSWAY System Preservation $1,504,448 $2,160,000 $2,715,000 $1,215,000 $1,065,000 $8,659,448 Road Safety 241,700 1,650,000 400,000 450,000 165,000 2,906,700 System Management 4,153,439 7,176,561 3,150,000 3,775,000 2,175,000 20,430,000 New Capacity 18,146,561 5,150,000 136,950,000 0 0 160,246,561 Capital Equipment 1,634,300 2,140,000 2,150,000 2,400,000 2,425,000 10,749,300 Total Expressway 25,680,448 18,276,561 145,365,000 7,840,000 5,830,000 202,992,009 AIRPORT 12,653,116 23,368,787 65,004,457 27,860,936 26,480,000 155,367,296 GRAND TOTAL $38,333,564 $41,645,348 $210,369,457 $35,700,936 $32,310,000$358,359,305

The Authority currently estimates that funding for the forecasted $25.6 million of 2007 Expressway projects would include approximately $809 thousand from proceeds of the 2004 Bonds and $19.1 million from the proceeds of the 2007 Notes and $4.1 million of general reserve funds on deposit in the construction fund as of December 31, 2006. The remaining funding for the 2007 Expressway projects is expected to come from excess net revenues forecasted to be available from the General Reserve Fund and federal funds and other sources that may be received by the Authority. The Authority has not yet identified the funding for the forecasted $177.3 million of 2008-2011 Expressway projects during the 2007-2011 period.

Funding for the estimated $155.3 million of Airport improvements is expected to be provided from a variety of sources, including: approximately $1 million from the proceeds of the 2006 Bonds; $129.9 million of federal Airport Improvement Program and discretionary grants; $15 million of passenger facility charges (authorization for which had been requested but had not been approved); $3 million from the Air National Guard and $900 thousand of general reserves on deposit in the construction fund as of December 31, 2006. The remaining funding is expected to come from excess net revenues forecasted to be available from the General Reserve Fund during the 2007–2011 period, federal funds and other sources that may be received by the Authority.

-63- The Authority expects to make periodic adjustments to the 2007–2011 capital plan reflecting on- going assessment of needs, project status and funding availability.

PROJECTED REVENUES, EXPENSES AND DEBT SERVICE COVERAGE

Table 6 summarizes projected revenues and expenses of the Authority from 2007 through 2011, including projected debt service coverage for all Outstanding Bonds of the Authority after issuance of the 2007 Notes.

The information in this Section is forward looking. Such projections are by their nature uncertain. Actual results may vary significantly from the projections included in Table 6. See also APPENDIX D – "Traffic Study" hereto.

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-64- Table 6 Projected Operations in 2007-2011 ($000's) 2007 2008 2009 2010 2011 Revenues Tolls $61,681 $64,900 $67,720 $69,751 $71,635 Concessions 1,971 2,073 2,161 2,225 2,285 Subtotal 63,652 66,973 69,881 71,976 73,920 Rentals 4,158 4,262 4,369 4,478 4,590 ETC Administrative Revenue 1,500 1,500 1,500 1,500 1,500 CRDA Parking Fees 2,770 2,770 2,770 2,770 2,770 Intercept Parking 351 351 351 351 351 Auto Surface and Garage Parking 1,623 1,672 1,722 1,774 1,827 Bus Permit Fees 445 445 445 445 445 ESP Revenue 0 0 0 0 Airport 5,586 5,809 6,041 6,283 6,534 Airport Surface Parking 3,482 1,572 1,731 2,118 2,347 Airport Parking Garage Revenues 4,925 4,925 5,372 5,372

Grants - SJTPO 4,102 2,124 2,124 2,124 2,124 - Transportation Services 2,525 2,525 2,525 2,525 2,525 - Other 0 0 0 0 1 Other 400 400 400 400 400 Total Operating Revenues 90,594 95,328 98,784 102,116 104,706 Less: Airport Revenues 5,586 5,809 6,041 6,283 6,534 Less Airport Surface Parking Revenue 3,482 1,572 1,731 2,118 2,347 Less Airport garage Parking Revenue 0 4,925 4,925 5,372 5,372 Less: Grant Revenue 6,627 4,649 4,649 4,649 4,650 Plus: Interest Revenues 1,700 1,700 1,700 1,700 1,700 Total Available Revenues 76,599 80,073 83,138 85,394 87,503 Total Operating Expenses - Existing 68,365 68,584 70,846 73,184 75,591 Less: Grant Expenses 4,649 4,649 4,649 4,649 4,649 Less: Parking Garage Expenses NYAG 483 498 514 530 547 Less: Airport Costs and Expenses 8,950 9,241 9,541 9,851 10,171 Less: Airport Surface Parking 1,189 1,567 1,632 1,709 1,784 Less: Airport Additional Garage Parking Exp - 39 33 36 29 Pledged Project Operating Expenses 51,116 52,590 54,477 56,409 58,411

Net Revenues 25,483 27,483 28,661 28,985 29,092 Airport Rev Available for Debt Service (ARVFDS) 204 1,751 2,266 2,266 2,266 Net Revenue + ARAFDS 25,687 29,324 30,927 31,251 31,358

Existing Debt Service 16,813 18,362 18,877 18,875 18,874 Debt Service on this issue1 0 0 0 0 0 Net Debt Service on Bonds 16,813 18,362 18,877 18,875 18,874

R&R Deposit 0 0 0 0 0 State Payment 2,500 2,500 2,500 2,500 2,500 Other Required Deposits 0 0 0 0 0 Parking Garage Expenses NYAG 483 498 514 530 547 Airport Subsidy 1,275 292 775 89 -3

Available for Other Authority Purposes 4,616 7,582 8,261 9,257 9,440

Projected Debt Service Coverage 7.08(a)(1) 120% 1.53x 1.59x 1.64x 1.66x 1.66x

Coverage test 7.08(a)(1) 100% - 1.22x 1.35x 1.36x 1.42x 1.43x Coverage test 7.08(a)(2) 1.13x 1.15x 1.16x 1.16x 1.16x

Source: The Authority. 1 Debt service on the 2007 Notes is not included in this Table 6. Interest on the 2007 Notes is capitalized through July 1, 2009 but excludes interest due on the maturity date (January 1, 2010). The Authority presently intends and expects to issue a Series of Refunding Bonds and to apply the proceeds thereof to retire the 2007 Notes on or before the maturity date thereof. The Authority has agreed in the 2007 Note Resolution that, in the event such Series of Refunding Bonds is issued, it will first apply the proceeds of such Series of Refunding Bonds to the payment of the 2007 Notes. There can be no assurance at this time, however, that such Series of Refunding Bonds will be issued.

-65- Management's Discussion of Projected Revenues and Expenses

Tolls and Concessions. The Authority has prepared the Table 6 projections for tolls and concessions based upon results of the ten year traffic and revenue study prepared by Wilbur Smith Associates. See APPENDIX D – "Traffic Study" hereto. Toll Revenues are expected to increase by 16% from 2007 to 2011, given the Authority's current toll rates and E-ZPass“ discount structure which includes the elimination of the regional E-ZPass“ discount implemented by the Authority in 2007. The projections assume traffic patterns remain consistent with traffic during the past five years.

CRDA Parking Fees. On October 17, 1997, in connection with the Connector Project, the Authority entered into a Parking Fee Agreement with the CRDA. Pursuant to this Agreement, a portion of certain statutory parking fees ("Marina Parking Fees") receivable by CRDA from marina parking facilities used in conjunction with any new licensed casino hotel construction and located on land in the Marina District are payable to the Authority. These parking fees pertain to the minimum charge per day for each motor vehicle parked, garaged or stored in a parking space in the parking facility, other than for motor vehicles owned or leased by the owner or operator of such facility or by an employee of the casino hotel which owns or leases such facility. The maximum amount payable by CRDA under the Parking Fee Agreement is an amount sufficient to amortize $67,566,510 in Authority bonds issued to finance the Connector Project. CRDA's payment obligations under the Parking Fee Agreement, as amended by the First, Second and Third Amendments dated June 15, 2001, September 20, 2001 and March 8, 2005, are subordinate to the prior lien on the Marina Parking Fees of certain parking revenue bonds of CRDA, plus liens associated with two additional issuances of CRDA parking revenue bonds. The Authority projects these revenues to be approximately $2,770,000 annually through 2011. The Authority began receiving revenues from these Parking Fees in 2003. See "SOURCES OF PAYMENT AND SECURITY FOR THE 2007 NOTES – Pledge of Net Revenues and Funds" and "ATLANTIC CITY/BRIGANTINE CONNECTOR – CRDA Agreements" herein.

Airport Revenues. Revenues are projected to increase by approximately 4% per year between 2007 and 2011, due to a projected increase in flights during this period. The Airport is expected to benefit from a shift in airline revenues generated through the leisure market over the traditional yields that come from business travel. The number of operations has grown with the addition of Delta jet services providing access to over 135 U.S. cities and Europe. See "AIRPORT – Operations –Airline Services" herein. Revenue is expected to improve with Spirit's fleet upgrade and new Caribbean destinations. In addition, the surface parking lot at the Airport, which was completed in 2001 and the parking garage scheduled for completion in spring 2008, are expected to generate increased revenue through 2011.

ETC Group Fees. This revenue represents the Authority's share of E-ZPass membership fees and administrative violation fees generated from the NJ E-ZPass“ Customer Service Center. See "ATLANTIC CITY EXPRESSWAY- Electronic Toll Collection" herein. They are projected to remain constant during the six-year period.

Other Revenues. The Authority has not included any increase in grant revenues or associated grant expenses in the forecast. The grants anticipated by the Authority are federal grants for the SJTPO and for the Transportation Services Division (new in 2004). The operating expenses of the SJTPO and Transportation Services Division are 100% reimbursable by federal, state and private grants.

The Authority estimates that interest earnings available to the Revenue Fund will remain constant at $1,700,000 over the period notwithstanding the current rising interest rate environment.

Operating Expenses. The Authority's non-Airport operating expenses consist of Expressway maintenance and toll operations, State Police costs, insurance, administration, and tourist services. The base year for these projections, 2007, reflects the Authority's approved budget for 2007, which includes a $6 million increase from budgeted non-Airport costs and expenses in 2006 due to the increased costs of

-66- health and other insurance premiums, E-ZPass“ expenses, utilities, fuel, police costs and growth of Authority staff due to increased lines of business such as parking and Airport customer service.

For the projected period, the Authority forecasts that non-Airport operating expenses will increase from $51.1 million in 2007 to $56.4 million in 2011 based upon a forecasted growth rate of 3.25% annually. In addition, the Authority began to account for Electronic Toll Collection Expense as an operating expense in 2003. This expense is based upon the new E-ZPass“ contract that was signed in 2003 by and between ACS State and Local Solutions and the New Jersey Turnpike Authority, New Jersey Highway Authority and the Authority. The Authority forecasts that the airport operating expenses will increase 3.25% annually for years 2007 through 2011.

OPERATIONAL FACTORS

Personnel Considerations

Labor

Authority Employees. In accordance with the Act, on the respective transfer dates, all employees and officers of the Expressway Authority and ACTA became employees of the Authority. Nothing in the Act may be construed to deprive any officer or employee of the original authorities of their rights, privileges, obligations or status with respect to any pension or retirement system. The employees of the original authorities retained all of their rights and benefits under existing collective bargaining agreements. The Authority recognized all existing collective bargaining units and all existing bargaining agents were retained to act on behalf of the employees of the original authorities. The Act provides that only officers or employees employed or collective bargaining agreements in effect on the effective date of the Act are subject to the grandfather provisions of the Act.

As of May 1, 2007, there were 351 full-time employees, and 174 part-time employees of the Authority. During the summer months, approximately 40 seasonal employees are added to the workforce. Although not direct employees of the Authority, a force of 42 state troopers is assigned by the State to patrol the Expressway, with the Authority paying for salaries, fringe benefits and expenses of this contingent.

In 1969, Local 196, Chapter 2 of the International Federation of Professional and Technical Engineers won collective bargaining rights to represent full-time and part-time Authority employees. The current collective bargaining agreement with Local 196 expires on July 31, 2007.

On October 30, 1990, the Expressway Authority entered into a union contract with local 193A of the International Federation of Professional and Technical Engineers which represents toll plaza supervisors. The bargaining unit was subsequently expanded to include lead foreman and foremen in the Expressway, Engineering and Airport Departments. The current contract with Local 193A expires on August 31, 2007.

On September 29, 1995, the Authority recognized the Atlantic City International Airport Firefighters Local S-18 of the International Association of Firefighters. The bargaining unit represents certain fire fighting personnel at the Airport. The current contract with Local S-18 expires on December 31, 2007.

Superintendents and all other supervisory employees are not represented by unions.

Since the inception of collective bargaining between the Authority (including its predecessors) and its employees, there has not been a work stoppage by Authority employees.

-67- Affirmative Action

The Authority complies with all federal, State and local laws, regulations, rules and legal requirements relating to affirmative action.

Regulatory Considerations

Certain of the activities of the Authority are subject to review, or are otherwise affected, by a variety of regulatory agencies, which include, are not limited, to those listed below.

Federal Aviation Administration

The FAA is responsible for the inspection and certification of various airfield facilities and procedures. In particular, the Federal Aviation Act requires air carrier airports to hold a current airport certificate granted by the FAA evidencing satisfactory compliance with numerous safety standards.

The FAA administers federal grants under the Airport and Airways Improvement Act of 1982, as amended, and monitors compliance with numerous grant conditions. Under certain circumstances, FAA approval could be required for certain Airport development projects. Such approval could be subject to the National Environmental Policy Act of 1969, as amended ("NEPA"). It is anticipated that certain components of the Airport capital program will require an Environmental Assessment ("EA") or an Environmental Impact Statement ("EIS") under NEPA. The EA or EIS would analyze numerous impacts of proposed projects, including the impacts on noise and wetlands, and could have a substantial effect on proposed projects.

The FAA provides and maintains navigational aids at the Airport and has exclusive control over airspace management and air traffic.

Environmental Protection Agency

The Environmental Protection Agency ("EPA"), with assistance from state agencies, administers air and water pollution control regulations which directly affect operations of the Authority.

New Jersey Department of Environmental Protection

The New Jersey Department of Environmental Protection ("NJDEP") administers a number of regulatory programs pursuant to legislative authority. The programs administered by the NJDEP include stream encroachments, sewer extensions, water diversion, water quality certifications, coastal zone management, wetlands, solid waste and resource recovery, hazardous substances and spills, water and air pollution, and fuel storage tanks. Some or all of the NJDEP's regulatory programs affect current and future operations of the Authority and may have a substantial effect on any proposed expansion or development of Authority projects.

Pinelands Commission

Virtually all of the property comprising the Airport and certain portions of the Expressway are within the Pinelands National Reserve as designated by Section 502 of the Federal National Parks and Recreation Act of 1978 (P.L. 95-625) ("Federal Act"). Pursuant to the terms of the Federal Act, the State has adopted the Pinelands Protection Act. Pursuant to the terms of the State's Pinelands Protection Act, severe restrictions can be and have been placed upon the ability to develop land located within the Pinelands area. Such restrictions are implemented and enforced by the New Jersey Pinelands Commission that oversees development activities in the Pinelands. Existing and future regulations of the Pinelands Commission could adversely affect proposed development of the Airport, the Expressway

-68- Project and other activities of the Authority within the Pinelands. The Authority and the Pinelands Commission have entered into a Memorandum of Agreement ("MOA") which confirms those portions of the existing and presently contemplated Airport projects which comply with the Pinelands Protection Act and sets forth the process by which the approved short-term development projects will be implemented under the terms of the MOA, as permitted by the Pinelands Protection Act, and approved by the Pinelands Commission.

New Jersey Department of Transportation

The NJDOT regulates all modes of transportation throughout the State including air and auto travel, as well as the activities of the Authority along the Expressway and other Transportation Projects. NJDOT permits have been received by the Authority for existing and proposed outdoor advertising along the Expressway. Pursuant to various statutory requirements, the Authority may be required to apply to NJDOT for various approvals relating to other proposed projects. In some instances, NJDOT permitting requirements may have a limiting effect on the ability of the Authority to implement its desired expansion and development objectives.

The Coastal Area Facilities Review Act

The Coastal Area Facilities Review Act ("CAFRA") was enacted in 1973. CAFRA's purpose is to regulate the development of facilities (as defined by CAFRA) within the coastal zone. A facility under CAFRA is broadly defined to include development such as housing developments of twenty-five (25) or more units, impervious or pervious paving of an area for 300 or more parking spaces for motor vehicles or paving an area 3 acres or more, and creation or extension of 1,200 or more feet of a roadway, sewer line or pipeline. The geographic limits of CAFRA jurisdiction are defined in the CAFRA statute and include significant areas in South Jersey. Some of the Authority's property is within the CAFRA area. Under CAFRA, the NJDEP Land Use Regulation Element reviews all environmental impacts in connection with the development of a facility. If the Authority develops a facility in the CAFRA area, it will need to comply with CAFRA. The Land Use Regulation Element of the NJDEP under the authority of CAFRA often imposes restrictions and limitations on the ability to utilize and develop land located within the CAFRA area. Existing and future regulations of the Land Use Regulation Element under CAFRA could adversely affect future development by the Authority, as well as general development and growth in South Jersey, all of which could have an adverse impact on Revenues.

Federal Highway Administration

The Expressway is part of the National Highway System and is subject to certain reviews of the Federal Highway Administration ("FHWA").

Other Regulatory Matters

Numerous activities of the Authority require approvals, or are subject to oversight, by local, State and federal agencies with jurisdiction over historic structures, wetlands, shorelines, harbor and other areas and over contamination and hazardous waste cases. These agencies include the U.S. Coast Guard, the U.S. Army Corps of Engineers, the NJDEP, county and municipal land use boards and agencies, and conservation and historic district commissions in the cities and towns in which the projects are located. In addition, the Authority is denominated by law to be "within" the NJDOT for certain purposes expressly provided by law. The Authority is also subject to regulations governing public bidding, occupational health and safety and matters relating to equal opportunity employment.

-69- New Jersey Motor Vehicle Commission

New Jersey Motor Vehicle Commission oversees the operation of the various types of autobus service in New Jersey and management of routing systems, tariffs and business practices. The autobus functions were transferred from New Jersey Department of Transportation.

Federal Transit Administration

Within the USDOT provides financial and technical assistance to local public transit systems. FTA oversees grants to state and local transit providers. FTA is responsible for ensuring that grantees follow Federal Mandates along with statutory and administrative requirements.

Environmental Considerations

Airport and Expressway Projects

There are a number of environmental concerns that affect Projects of the Authority. The concerns discussed below should not be considered definitive or exhaustive.

As indicated above, the Airport and certain sections of the Expressway are located within the Pinelands National Reserve. Development in these areas is subject to land use controls developed and implemented through a cooperative program involving federal, State and local governments. In the State, oversight and coordination of land use controls are coordinated by the New Jersey Pinelands Commission. Therefore, all development and construction at the Airport and on designated sections of the Expressway requires Pinelands Commission approval. See "OPERATIONAL FACTORS - Regulatory Considerations - Pinelands Commission" herein.

The Airport and portions of the Expressway contain or are bound by several other environmentally-sensitive areas. These areas primarily consist of stream, forest and wetlands. Prior to any development of these areas, wetlands studies are required and, as detailed above, there must be compliance with various NJDEP regulations.

The Civil Terminal Area of the Airport was the location of three separate hazardous waste sites. First, hazardous substances were identified at a salvage yard on a portion of the Civil Terminal Area property designated as "Site L". In connection with the sale of the Civil Terminal Area by Atlantic City to the Authority, Atlantic City entered into an Interim Response Action/Administrative Consent Order ("Site L ACO") with NJDEP providing for removal of contaminated soil, the installation of ground water monitoring wells, and collection of soil samples to insure that removal of all contamination has been successfully completed. This work has been completed.

Second, asbestos was identified in a portion of the Airport's Civil Terminal Building area. To address this problem, Atlantic City implemented an asbestos abatement program funded in part by an FAA grant. In connection with its sale of the Civil Terminal Area to the Authority, Atlantic City agreed to complete the asbestos removal and funds for this work were contained in the security fund described below. Such removal has been completed.

The third contaminated site at the Civil Terminal Area involved an underground fuel storage tank site ("Butler Site"). The previous leasehold owner, Butler International, Inc. (formerly known as North American Ventures), incurred site clean up responsibilities under the New Jersey Environmental Clean Up Responsibility Act ("ECRA") and entered into an Administrative Consent Order ("Butler ACO") with NJDEP to develop and implement a site clean up plan. To implement such plan, a new above-ground fuel tank farm was installed and the underground fuel storage tanks were removed. This work has been completed, and the site remains subject to groundwater monitoring.

-70- Atlantic City agreed that it shall be ultimately responsible to insure complete removal and remediation of all hazardous or contaminated material located at the Civil Terminal Area.

The Civil Terminal Area, the Expressway and other existing Projects have all necessary sewer and water service. Future expansion of the Civil Terminal Area will require supplemental sewerage capacity, probably in conjunction with the FAA. Application for additional allocation must be made to respective host municipalities.

In addition to the foregoing, the Civil Terminal Area, Expressway and other activities of the Authority are now, and in the future will be, subject to noise, air and water pollution, ground access and other impacts which have required and will require study in connection with ongoing operations. To address these and other relevant environmental concerns at the Airport, the FAA conducted an Environmental Impact Study for the proposed construction of the Airport Layout Plan. The Record of Decision was issued in March 2004 certifying compliance with the federal environmental requirements and approving the use of FAA funding as applicable for construction of the projects.

The Act further mandates that the Authority, in operating the Airport, should be cognizant of the effect of excess aircraft noise and should encourage FAA efforts to route flights over the least populous areas of South Jersey. The Airport is in compliance with Federal regulations.

Expressway Project-Intercept Parking Lot

During the early years of casino development, Atlantic City had a shortage of parking for employees. State policy was to have employees park outside Atlantic City and use public transportation to complete their trip. The Expressway Authority (a predecessor of the Authority) determined that a portion of the median would be suitable for that purpose. A parking lot, capable of handling 2,500 vehicles, opened in 1981.

As additional parking was developed in Atlantic City, use of the intercept parking lot declined. At present, one casino leases space at the intercept lot for approximately 350 vehicles.

Recognizing the potential for the unused space, the Authority has provided a portion of the property for construction of a Visitor's Center which was built by CRDA and is staffed by the Atlantic City Convention and Visitor's Authority. The Authority has leased the remainder of the unused space to Sun Oil for operation of a service station.

Financial Considerations

Financial Management System

The Authority has reorganized all of its operating elements into a single consistent financial system. The investment procedures of the Authority are governed by the Resolution. The Authority has implemented an investment policy similar to that of the State. The procurement policies of the Authority include the pursuit of federal funding and follow State bidding rules and regulations.

Pension and Retirement Plans

The Act provides that any Authority employees not subject to the New Jersey Employer- Employee Relations Act, N.J.S.A. 34:13A-1 et seq., i.e., elected officials, members of boards and commissions, managerial executives who formulate and direct the implementation of management policies and practices, and confidential employees whose functional responsibilities or knowledge of confidential labor relations issues would make membership in a collective bargaining unit incompatible with their official duties, will receive sick and vacation leave only as provided for State employees in the Civil Service Act, N.J.S.A. 11A:1-1 et seq. and if supplemental compensation upon retirement is to be paid it will be calculated and limited in accordance with N.J.S.A. 11A:6-19. The Act further provides that

-71- such employees will receive health benefits no greater than those provided to State employees under the New Jersey State Health Benefits Program Act, N.J.S.A. 52:14-17.25 et seq.

Most permanent full-time Authority employees are required as a condition of employment to be members of the Public Employees Retirement System ("PERS") of the State, a multiple employer public retirement system. Covered Authority employees are required by PERS to contribute a percentage of their salary. The Authority is required by State statute to contribute the remaining amounts necessary to pay benefits when due. Pension contributions are billed by PERS to the Authority annually based on the annualization of the wages paid in the first quarter of the year. In addition, Authority employees are covered by the Federal Social Security Act.

As of April 1, 1999 all permanent full-time Authority fire fighting personnel are required as a condition of employment to be members of the Police and Firemen's Retirement System ("PFRS") of the State, a multiple employer public retirement system. Covered Authority employees are required by PFRS to contribute a percentage of their salary. The Authority is required by a ruling from the Division of Pensions to contribute the amount necessary to pay benefits when due. Pension contributions are billed by PFRS to the Authority annually based on the annualization of the wages paid in the first quarter of the year. In addition, these Authority employees are covered by the Federal Social Security Act.

Other Post Employment Benefits

The Governmental Accounting Standards Board has promulgated Statement Number 45 ("GASB 45") with respect to reporting the annual cost of the post-employment benefits ("OPEBs") and the unfunded actuarial accrued liabilities for the cost of OPEBs. GASB 45 becomes effective, in the case of the Authority, for the calendar year ending December 31, 2008. The Authority is committed to complying with GASB 45 with respect to reporting the annual cost of and the unfunded actuarial accrued liabilities for the cost of its OPEBs.

LITIGATION

There is no litigation pending or, to the knowledge of the Authority or its General Counsel threatened in any court, questioning the official existence of the Authority or the power of the Authority to collect and pledge revenues in accordance with the terms of the Resolution to pay the 2007 Notes.

The Authority has received notices from or on behalf of a number of potential claimants regarding claims for personal injuries including bodily injury and/or property damage arising in connection with the operations of the Authority and its various properties including the Expressway, the Connector and the Airport. There are approximately 43 of such claims currently pending which consist of slip and fall incidents, motor vehicle accidents, workplace injuries, employment related claims and similar occurrences, some of which name additional third-parties as co-defendants with the Authority, and some of which may potentially involve the possibility of a substantial recovery. Litigation has been commenced against the Authority in many but not all of such matters, most of which involve liability of the type typically covered by the Authority's insurance.

LEGAL MATTERS

Legal matters incident to the authorization, sale and delivery of the 2007 Notes by the Authority are subject to the approval as to legality by Cozen O’Connor, Newark, New Jersey, Bond Counsel, whose opinion to such effect shall be substantially in the form set forth in APPENDIX F hereto. Certain legal matters will be passed upon for the Authority by its General Counsel, Florio Perrucci Steinhardt & Fader, L.L.C., Phillipsburg, New Jersey. Certain legal matters will be passed upon for the Underwriter by its counsel, Parker McCay P.A., Marlton, New Jersey.

-72- The various legal opinions to be delivered concurrently with the delivery of the 2007 Notes express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon or the future performance of parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

ENFORCEABILITY OF REMEDIES

The remedies available to the Bond Trustee upon an Event of Default under the Resolution or any other related financing documents are dependent upon judicial actions that are often based on the discretion of the judge overseeing a proceeding. Administrative delays may also impact the timetable for judicial approval of the exercise of certain remedies. Under existing law, the remedies provided in such documents may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the 2007 Notes will be qualified as to enforceability of the various legal instruments by limitations imposed by Federal and State laws affecting the rights of creditors generally, and of creditors in this type of transaction specifically, including the availability of equitable remedies.

LEGALITY FOR INVESTMENT

Under the Act, the 2007 Notes are securities in which the State and all public officers, municipalities, counties, political subdivisions and public bodies and agencies thereof, all banks, bankers, trust companies, savings banks and institutions, building and loan associations, investment companies, savings and loan associations, and other persons carrying on a banking or investment business, all insurance companies, insurance associations and all persons carrying on an insurance business, and all executors, administrators, guardians, trustees and other fiduciaries, may legally invest any sinking funds, moneys or other funds belonging to them or within their control and the 2007 Notes are authorized security for public deposits.

TAX MATTERS

Interest on the 2007 Notes is includable in gross income for federal income tax purposes under the Internal Revenue Code of 1986, as amended.

In the opinion of Bond Counsel, interest on the 2007 Notes and any gain realized on the sale of the Notes are not includable in gross income under the existing New Jersey Gross Income Tax Act.

EACH PURCHASER OF THE 2007 NOTES SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE OWNERSHIP OF THE NOTES.

See APPENDIX F to this Official Statement for the complete text of the proposed form of Bond Counsel's legal opinion with respect to the 2007 Notes.

RATINGS

At the time of issuance, the 2007 Notes are expected to be rated "AAA", "Aaa" and "AAA" by Fitch Ratings ("Fitch"), Moody's Investors Service ("Moody's"), and Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies ("S&P"), respectively, with the understanding that upon delivery of the 2007 Notes, the Policy insuring the payment when due of the principal of and interest on the 2007 Notes will be issued by Financial Security.

-73- Such ratings reflect only the views of each organization, and an explanation of the significance of such ratings can only be obtained from Fitch, Moody's, and S&P at the following addresses: Fitch Ratings, One State Street Plaza, New York, New York 10004, Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007, and Standard & Poor's Ratings Services, 55 Water St., New York, New York 10041. There is no assurance that these ratings will remain in effect for any given period of time or that they will not be revised downward or withdrawn entirely by Fitch, Moody's and S&P if, in the judgment of these rating agencies, circumstances so warrant. Any such downgrade revision or withdrawal of such ratings may have an adverse effect on the market price of the 2007 Notes. The Underwriter has not agreed to take any action with respect to any proposed rating changes or to bring such rating changes, if any, to the attention of the owners of the 2007 Notes.

FINANCIAL STATEMENTS

The financial statements of the Authority for the fiscal year ended December 31, 2006 included in APPENDIX A to this Official Statement have been examined by Ford, Scott, Seidenburg & Kennedy, L.L.C., Certified Public Accountants whose report thereon appears therein. Such financial statements have been included in this Official Statement in reliance upon the report of Ford, Scott, Seidenburg & Kennedy, L.L.C., given upon the authority of such firm as experts in accounting and auditing.

EXPERTS

The Traffic Engineering Consultants' Report included as APPENDIX D to this Official Statement has been prepared by Wilbur Smith Associates. The Traffic Engineering Consultants' Report is based on historical data provided by the Authority and certain other factors. This Report has been included in the Official Statement in reliance on the Traffic Engineering Consultants' knowledge and experience in examining and projecting such matters. Unanticipated events and circumstances may occur which would affect the forecasts contained therein. Therefore, the actual results achieved during the forecast period may vary materially from those forecasted.

UNDERWRITING

Citigroup Global Markets Inc., the Underwriter, is purchasing the 2007 Notes at an aggregate purchase price equal to $22,245,422.65 (representing the principal amount of the 2007 Notes, less an original issue discount of $51,497.00 and less an Underwriter's discount of $93,080.35). The Purchase Contract, executed by the Underwriter, provides that the Underwriter will purchase all of the 2007 Notes, if any are purchased. The obligation of the Underwriter to accept delivery of the 2007 Notes is subject to various conditions contained in the Purchase Contract.

The Underwriter intends to offer the 2007 Notes to the public initially at the offering yield set forth on the front cover page of this Official Statement, which may subsequently change without any requirement of prior notice. The Underwriter may offer and sell the 2007 Notes to certain dealers (including dealers depositing the 2007 Notes into investment trusts) at yields higher than the offering yield set forth on the front cover page of this Official Statement, and such offering yields may be changed, from time to time, by the Underwriter.

SECONDARY MARKET DISCLOSURE

In order to assist the Underwriter in complying with Rule 15c2-12 promulgated by the Securities and Exchange Commission, as it applies to the 2007 Notes, the Authority, in a Continuing Disclosure Agreement ("Continuing Disclosure Agreement") in the form attached hereto as APPENDIX E by and between the Paying Agent, acting as dissemination agent, and the Authority, will undertake for the benefit

-74- of the holders of the 2007 Notes to provide certain notices for filing and other information. A copy of the Continuing Disclosure Agreement when executed by the parties thereto upon the delivery of the 2007 Notes will be on file at the corporate trust office of the Paying Agent. The Authority is in compliance with all of its undertakings pursuant to Rule 15c2-12. See APPENDIX E - "Form of Continuing Disclosure Agreement" hereto.

MISCELLANEOUS

The references herein to the Act, the Resolution and the 2007 Note Resolution, respectively, are brief outlines of certain provisions thereof. Such outlines do not purport to be complete and reference is made to the Act, the Resolution and the 2007 Note Resolution for full and complete statements of such provisions.

The authorization, agreements and covenants of the Authority are set forth in the Resolution and the 2007 Note Resolution. Neither this Official Statement nor any advertisement of the 2007 Notes is or shall be construed to be a contract with the holders of the 2007 Notes. Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not expressly so identified, are intended merely as such and not as representations of fact. The Authority has authorized the distribution of this Official Statement to prospective purchasers of the 2007 Notes and others.

The execution and delivery of this Official Statement by its Executive Director have been duly authorized by the Authority.

SOUTH JERSEY TRANSPORTATION AUTHORITY

By: /s/ Bart R. Mueller BART R. MUELLER, Executive Director

Dated: July 5, 2007

-75- [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A

AUDITED FINANCIAL STATEMENTS OF THE AUTHORITY, YEAR ENDED DECEMBER 31, 2006 [THIS PAGE INTENTIONALLY LEFT BLANK] South Jersey Transportation Authority

Report of Audit

For The Year Ended December 31, 2006 TABLE OF CONTENTS

Page

Independent Auditor's Report 1-2

Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 3-4

Required Supplementary Information - Part I Management's Discussion and Analysis 5-12

Basic Financial Statements

Statement of Net Assets 13-15 Statement of Revenues, Expenses, and Changes in Net Assets 16 Statement of Cash Flows 17 Statement of Net Assets - Proprietary Funds 18-20 Statement of Revenues, Expenses, and Changes in Net Assets - Proprietary Funds 21 Statement of Cash Flows - Proprietary Funds 22

Notes to Financial Statements 23-59

Other Supplementary Information

Statement of Net Assets - Fund Financial Statements 60-62 Statement of Revenues, Expenses, and Changes in Net Assets - Fund Financial Statements 63-64 Schedule of Bonds and Other Debt 65-66 Schedule of Toll Revenue 67 Chairman and Commissioners of the South Jersey Transportation Authority Hammonton, New Jersey

INDEPENDENT AUDITOR'S REPORT

We have audited the accompanying basic financial statements of the South Jersey Transportation Authority (“Authority”), a component unit of the State of New Jersey, as of and for the year ended December 31, 2006, as listed in the accompanying table of contents. These basic financial statements are the responsibility of the Authority’s management. Our responsibility is to express an opinion on these basic financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Authority as of December 31, 2006, and the respective changes in its financial position and cash flows, where applicable, for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated March 12, 2007 on our consideration of the Authority’s internal control structure over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of our audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

1 The management’s discussion and analysis, as listed in the table of contents, is not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and the presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements of the Authority taken as a whole. The accompanying financial information listed as Other Supplementary Information is not a required part of the basic financial statements, but is presented as additional analytical data. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects in relation to the basic financial statements taken as a whole.

Ford, Scott, Seidenburg & Kennedy, L.L.C. FORD, SCOTT, SEIDENBURG & KENNEDY, L.L.C. CERTIFIED PUBLIC ACCOUNTANTS

Leon P. Costello Certified Public Accountant

March 12, 2007

2 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Chairman and Commissioners of the South Jersey Transportation Authority Hammonton, New Jersey

We have audited the basic financial statements of the South Jersey Transportation Authority (“Authority”), a component unit of the State of New Jersey, as of and for the year ended December 31, 2006, and have issued our report thereon dated March 12, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the Authority’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control over financial reporting.

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process or report financial data reliably in accordance with the basis of accounting generally accepted in the United States of America, such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control.

3 A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity’s internal control.

Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we that we consider to be material weaknesses, as defined above.

Compliance

As part of obtaining reasonable assurance about whether the Authority’s basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of basic financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

We noted certain matters that we reported to the Authority’s management in a separate letter dated March 12, 2007.

This report is intended solely for the information and use of management, the Finance Committee, others within the organization and for filing with the State Treasurer, and is not intended to be and should not be used by anyone other than these specified parties.

Ford, Scott, Seidenburg & Kennedy, L.L.C. FORD, SCOTT, SEIDENBURG & KENNEDY, L.L.C. CERTIFIED PUBLIC ACCOUNTANTS

Leon P. Costello Certified Public Accountant

March 12, 2007

4 MANAGEMENT’S DISCUSSION AND ANALYSIS

Our discussion and analysis of the South Jersey Transportation Authority’s financial performance provides an overview of the Authority’s financial activities for the year ended December 31, 2006. Please read it in conjunction with the Authority’s financial statements that begin on Page 13.

Financial Highlights

x ISSUANCE OF TRANSPORTATION SYSTEM REVENUE BONDS: On January 12, 2006, the Authority issued Transportation System Revenue Bonds, 2006 Series A, in the principal amount of $50,365,000. Proceeds of the 2006 Series A Bonds were used to finance (i) the construction of a multi-level parking garage containing approximately 1,400 parking spaces located in front of the passenger terminal at the Atlantic City International Airport, including the construction of a fare collection system capable of accepting E-ZPass as a method of payment; (ii) the redemption of the Authority’s $10,400,000 Subordinated Notes, Series 2005, dated March 30, 2005 and due March 29, 2006 including interest thereon; (iii) the amount required to increase the amount on deposit in the Debt Service Reserve Fund to the Debt Service Reserve Requirement; (iv) a portion of the interest on the 2006 Series A Bonds for approximately twenty- four months; and (v) certain costs of issuing the 2006 Series A Bonds. The 2005 Subordinate Notes along with interest expense were repaid on February 16, 2006. On July 20, 2006, the Authority entered into a design/build contract for approximately $24.7 million for the construction of the garage. The facility is anticipated to be open in Spring of 2008.

x AIRPORT SUBSIDY: The Authority’s enabling legislation created the South Jersey Transportation Authority to deal with regional transportation issues. Included in the legislation were the powers to acquire and operate the Atlantic City International Airport. (ACY). The available surplus, net revenue generated by the Atlantic City Expressway project, has historically been available to subsidize the airport operations as was anticipated in the legislation and clearly presented in the original documents adopted by the Authority. The airport project is considered a general project under the Authority’s General Bond Resolution and payment of any airport subsidy (excess of airport expenses over airport revenues) is subordinate to payments to bond holders under the Authority’s General Bond Resolution and payable from the general reserve fund. Prior to September 11, 2001, the airport subsidy was steadily decreasing; in fact for the year ended December 31, 2000, the airport generated a small operating surplus. The subsidy has increased since the events of September 11, 2001 due to revenue losses resulting from declines in the airline industry and expense increases resulting from additional requirements including fulltime police presence, and increased insurance costs. The airport subsidy was $2,055,441 for the year ended December 31, 2006.

x MARINA PARKING REVENUE: On October 10, 1997, in connection with the Atlantic City Expressway Connector Project, the Authority entered into a Parking Fee Agreement with the Casino Reinvestment Development Authority (“CRDA”). Pursuant to the Agreement, a portion of certain statutory parking fees (“Marina Parking Fees”) receivable by CRDA from marina parking facilities used in conjunction with any new licensed casino hotel construction and located on land in the Marina District (also commonly known as the H-Tract) will be payable to the Authority. These parking fees pertain to the minimum charge per day for each motor vehicle parked, garaged or stored in a parking space in the parking facility, other than for motor vehicles owned or leased by the owner or operator of such facility or by an employee of the casino hotel which owns or leases such facility. The maximum amount payable by CRDA under the Parking Fee Agreement is an amount sufficient to amortize $65 million in Authority bonds issued to finance the Atlantic City Expressway Connector Project and certain allocated costs of issuance. CRDA’s payment obligations under the Parking Fee Agreement, as amended by the First, Second and Third Amendments dated June 15, September 20, 2001, and March 8, 2005 respectively are subordinate to the prior lien on the Marina Parking Fees of certain parking revenue bonds of CRDA, plus liens associated with two additional issuances CRDA parking revenue bonds. There are no assurances that the amount of Marina Parking Fees available to enable CRDA to repay the Authority will be sufficient for such purposes.

5 Financial Highlights (Continued)

Because of the subordination provisions described above the Authority does not recognize revenue until CRDA releases amounts collected in excess of amounts required to satisfy the debt service requirement under the senior lien bond resolutions. The Authority recognized $2,846,946 during 2006 versus $3,653,383 in 2005. As a result of the third amendment to the parking fee agreement, the Authority was able to accelerate release of some of the fees in 2005. The decrease in revenue in 2006 is due to sixteen months worth of parking fees being recognized in 2005 verses a full twelve months worth of revenue being recognized in 2006.

x VOLUNTARY SEPARATION PLAN: - On October 17, 2006, the Commissioners approved the Voluntary Separation Plan (“Plan”). The purpose of the Plan is to provide separation pay to certain Authority employees who voluntarily elect to terminate employment. This plan was open to any employee who had at least fifteen (15) years of Authority, Public Employees Retirement System (“PERS”) or Police and Fireman’s Retirement System (“PFRS”) service, as of December 31, 2006. In addition, the plan was separate and distinct from any other benefits for which Participants may be eligible, such as retirement payment under the Public Employment Retirement System. Any Participant’s separation payment was equal to one-half year of their Base Pay. During 2006, eleven (11) Participants elected to receive the early separation payment’s totaling $365,997.

x TERMINATION AGREEMENT and DEFEASANCE OF CONDUIT DEBT – In 1997, the Authority issued $5,130,000 in Lease Revenue Bonds to provide funds to pay a portion of the cost of constructing and equipping a special fixed base operator facility at the Atlantic City International Airport which was leased and operated by Raytheon Aircraft Services, Inc. (Raytheon). These bonds were secured by Raytheon Corporation and were a conduit obligation of the Authority. On June 29, 2006, the Authority entered into a termination agreement with Raytheon wherein Raytheon agreed to terminate all of its rights under the contract and further agreed to deposit $4,374,424.42 into an escrow account at Bank of New York. This amount was sufficient to pay the January 1, 2006 sinking fund payment, the optional call, call premium and interest. These bonds were called and paid off in January 2007. Simultaneously with this transaction, the Authority entered into a Modification of a Use and Occupancy agreement with an existing tenant at the Airport to allow them to take over the space previously occupied by Raytheon at terms more favorable to the Authority.

Using this Financial Report

This financial report consists of a series of financial statements, notes to the financial statements and supplementary information. The Basic Financial Statements consist of the Statement of Net Assets, the Statement of Revenues, Expenses and Changes in Net Assets (“Operating Statement”) and the Statement of Cash Flows (on Pages 13 – 17) that provide information about the activities of the Authority as a single enterprise Fund. An enterprise fund uses proprietary fund reporting that focuses on the determination of operating income, changes in net assets (or cost recovery), financial position and cash flows. Proprietary Fund financial statements for the Authority’s two main funds start on Page 18. These financial statements report the Authority’s operations in more detail than the Basic Financial Statements by providing information about the Authority’s most significant funds. The Authority’s two major operating entities, which are being reported separately in the Proprietary Fund financial statements, are the Atlantic City Expressway (“Expressway”) and the Atlantic City International Airport (“Airport”). Common costs for these two major operating entities are generally assigned to the Expressway.

Fund financial statements are also included in the Other Supplementary Information on Pages 60 - 64. Fund financial statements report the Authority’s operations, in detail, for all of the funds of the Authority. Some funds are required to be established by bond covenants, while the Authority establishes many other funds to help it control and manage money for particular purposes. Resources are accounted for in individual funds based upon the purpose for which they are to be spent and the restrictions, if any, on the spending activities.

6 Financial Statements of the Authority

All of the Authority’s financial statements are prepared based on an accrual basis in accordance with accounting principles generally accepted in the United States of America. Accrual of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. Capital assets are capitalized and, (except land and construction in progress), are depreciated over their useful lives. Amounts are restricted for rehabilitation and repair, debt service and, where applicable, capital projects.

The statement of Net Assets and the Statement of Revenues, Expenses and Changes in Net Assets report information on all Authority assets, liabilities, revenues and expenses in a manner similar to that used by most private-sector companies. These two statements also report the Authority’s net assets and changes in them. One can think of the Authority’s net assets – the difference between assets and liabilities- as one way to measure the Authority’s financial health, or financial position.

Over time, increases or decreases in the Authority’s net assets are one indicator of whether its financial health is improving or deteriorating. Net assets increase both when revenues exceed expenses and when the Authority’s assets increase without a corresponding increase in the Authority’s liabilities. It is important to note, however, depreciation’s negative impact on net assets. Depreciation decreases the Authority’s net assets even though it is a non-cash expense and may represent a write off against a contributed capital item paid for by a federal grant or private source.

The Statement of Cash Flows presents information about the Authority’s relevant sources and uses of cash for the year. It is prepared in a manner that summarizes (1) cash flows from operations, (2) non- capital financing activities, (3) capital and related financing activities and (4) investing activities. Additionally, non-cash transactions that have an effect on the Authority’s financial position are also presented in the Statement of Cash Flows. Specifically, the Statement of Cash Flows, together with related disclosures and information on other financial statements, can be useful in assessing the following: x Ability of an entity to generate future cash flows x Ability of an entity to pay its debt as the debt matures x Need to seek outside financing x Reasons for differences between cash flows from operations and operating income x Effect on an entity’s financial position of cash and non-cash transactions from investing, capital and financing activities

Financial Analysis of the Authority’s Statement of Net Assets

The increase in unrestricted current assets in the amount of $7.6 million resulted primarily from an increase in cash and cash equivalents in the amount of $6.0 million, an increase in investments in the amount $1.9 million and a decrease in accounts receivable in the amount of $1.0 million primarily attributable to a Casino Parking Fee receivable.

Restricted current and other assets increased in 2006 in the amount of $33.3 million. This increase resulted primarily from an increase in cash and cash equivalents in the amount of $11.4 million, an increase in investments in the amount of $21.2 million. The increase in cash and investments can be attributed to the proceeds from the issuance of the Transportation System Revenue Bonds in January of 2006.

Capital assets, net of accumulated depreciation, decreased by a net of $4.1 million. The Expressway’s Capital Assets, net of depreciation, decreased by $6.6 million, while the Airport capital assets, net of depreciation, increased by $2.5 million.

The charts on the following page detail the Expressway’s decrease in capital assets, net of accumulated depreciation, and the Airports increase in capital assets, net of depreciation:

7 Financial Analysis of the Authority’s Statement of Net Assets (Continued)

EXPRESSWAY

Project Amount

Elevated Walkway$ 1.1 million Third Lane Project Construction 0.5 million Capital Equipment 0.8 million Fleet Maintenance - State Police Vehicles 0.4 million Farley Exit Ramp & Lot Improvements 0.6 million Other Facility and Equipment Costs 3.5 million Bridge Repairs and Inspections 0.5 million Atlantic City Parking Facility 0.6 million Change in Accumulated Depreciation (14.6) million Total Expressway Decrease$ (6.6)

AIRPORT

Project Amount Auto Parking$ 1.0 million Passenger Screening Section 1 5.1 million Change in Accumulated Depreciation (3.6) million Total Airport Increase$ 2.5 million

The Authority’s outstanding long-term debt includes four separate series of transportation system revenue bonds; each of which include serial bonds, term bonds, and some that include both serial and term bond components and are net of discounts, premiums, and a deferred loss on refunding.

The 2006 Series A Transportation System Revenue Bonds (term bond) of $50,365,000 carries an interest rate of 4.50% and mature on November 1, 2035. The 2006 Series A Bonds are subject to mandatory sinking fund redemption prior to maturity at a redemption price of 100% of the principal amount thereof being redeemed, without premium, plus accrued interest to the redemption date. Proceeds of the 2006 Series A Transportation System Revenue Bonds are to be used to finance ((1) the construction of a multi- level parking garage containing approximately 1,400 parking spaces located in front of the passenger terminal at the Atlantic City International Airport, including the construction of a fare collection system capable of accepting E-ZPass as a method of payment; (2) the redemption of the Authority’s $10,400,000 Subordinated Notes, Series 2005, dated March 30, 2005 and due March 29, 2006 including interest thereon; (3) the amount required to increase the amount on deposit in the Debt Service Reserve Fund to the Debt Service Reserve Requirement; (4) a portion of the interest on the 2006 Series A Bonds for approximately twenty-four months; and (5) pay certain costs of issuing the 2006 Series A Bonds.

The 2004 Series A Transportation System Revenue Bonds of $22,235,000 have interest rates ranging from 2.25% to 5.15% and mature in various increments November 1, 2004 through November 1, 2033.

The 2003 Series Transportation System Revenue Refunding Bonds (serial bonds) of $15,790,000 have interest rates ranging from 2.0% to 5.25% and mature in various increments November 1, 2004 through November 1, 2012. Proceeds of the 2003 Series Refunding Bonds were used to: (1) defease and refund a portion of the $15,455,000 Transportation System Revenue Bonds, 1992 Series B (tax exempt), and (2) pay certain costs of issuance of the 2003 Bonds. 8 Financial Analysis of the Authority’s Statement of Net Assets (Continued)

The 1999 Series serial bonds mature in various increments from November 1, 2000 through November 1, 2019, while the 1999 Series term bonds mature November 1, 2022 and 2029. Interest rates on these bonds range from 3.20% to 5.125%.

In 2006, the Authority made $15.5 million in bond principal payments and $13.6 million in bond interest payments.

Current liabilities payable from unrestricted assets increased by $1.9 million, primarily from an increase in the reserve for self insurance in the amount of $736,000, an increase in the accrued compensated absence payable in the amount of $337,000 and an increase in accounts payable in the amount of $880,000 due, in part, to an increase in the accrual of year-end electronic toll collection expense.

Other non-current liabilities increased by $1.0 million, entirely due to an increase in the arbitrage rebate payable.

Current liabilities payable from restricted assets decreased by $7.5 million, primarily from the redemption of the Subordinated Notes, Series 2005 in the amount of $10,400,000. These Notes were issued to fund a settlement which resulted in the acquisition of the airport surface lot operations at the Atlantic City International Airport. An increase in accounts payable in the amount of $1.1 million primarily from the year-end accrual of Electronic Toll Collection expenses, an increase in the amount of Passenger Facility Charges in the amount of $2.0 million, and a decrease in the unamortized SWAP Premium in the amount of $468,000.

SOUTH JERSEY TRANSPORTATION AUTHORITY STATEMENT OF NET ASSETS December 31, 2006 With Comparative Totals as of December 31, 2005

2006 2005

Unrestricted Current and Other Assets $ 30,380,431 $ 22,736,458 Restricted Current and Other Assets 90,807,426 57,416,018 Capital Assets 511,453,630 515,546,986 Other Noncurrent Assets 7,126,443 5,801,207 Total Assets 639,767,930 601,500,669

Long-term debt outstanding 268,347,626 224,338,654 Other Unrestricted Liabilities 7,229,516 5,265,217 Other Restricted Liabilities 22,904,978 30,488,247 Other Noncurrent Liabilities 1,229,642 184,495 Total Liabilities 299,711,762 260,276,613

Net Assets: Invested in Capital Assets, Net of Related Debt 237,826,510 272,891,217 Restricted 70,279,055 42,046,812 Unrestricted 31,950,603 26,286,027 Total Net Assets $ 340,056,168 $ 341,224,056

9 Financial Analysis of the Authority’s Statement of Revenues, Expenses and Changes in Net Assets

Expressway Revenue and Expense:

Expressway operating revenues increased by $749,000 as a result of the following:

o A $1.5 million increase in toll revenue due to increased traffic. o A $.8 million decrease in marina parking revenue due to acceleration in payment of parking fees as a result of the third amendment to the parking fee agreement. Sixteen months worth of revenue was recognized during 2005, whereas a full twelve months worth of revenue was recognized in 2006.

These increases were offset by a $346,000 decrease in SJTPO grant revenue, due to a reduction in Local Scoping Projects nearing completion. An increase in garage parking revenue in the amount of $335,000 was due to a rate increase in October 2006, and an increase in rental revenue in the amount of $137,500, also contributed to the change.

Expressway operating expenses increased by $3.3 million in 2006 due in to an increase in the cost of the Authority’s insurance program; increases in state police costs; an increase in the Authority’s contribution to the state pension fund; and additional personnel to operate the Atlantic City garage and surface lots. Transportation Services grant expenses were also a part of the increase, but this increase was offset by increases in grant revenue.

On November 13, 2003, Trump Hotels and Casino Resorts, Inc. (“Trump Hotels”) filed an action in the Superior Court of New Jersey, Atlantic County, Law Division against the Authority. Trump Hotels has alleged in the action that the Authority breached an agreement entered into between Trump Hotels and the Authority on or about June 28, 2002 (the “Trump Agreement”). Trump Hotels alleged that the Authority failed to complete the road project known as “Huron Avenue U-Turn” in the time provided in the Trump Agreement. Trump Hotels alleged that pursuant to the Trump Agreement, the Authority was required to complete the aforementioned project on or before June 30, 2003, or, alternatively, prior to the opening of the first facility in the Huron North Redevelopment Area, subject to any unforeseen construction delays that may be experienced by the Authority. The project was not completed, and thereby open for use, until October 23, 2003, due to the unforeseen occurrence of prolonged settlement related to the two-stage surcharges, and unforeseen weather conditions. Trump Hotels had sought damages, alleging that the failure to complete the said road project caused a loss of slot revenues at Trump Hotels marina casino for the 115 days that the project was delayed in opening. Trump Hotels did not allege the loss of any other revenues. The Authority and Trump Hotels amicably resolved the claims made in the suit by and through a settlement approved by the Authority’s Commissioners at the July 20, 2006 regular meeting in the amount of $1,750,000 to be paid in two (2) payments, with one payment being made in 2006, and the second payment to be made in 2007, and appropriately reported as an accounts payable in the amount of $750,000 at December 31, 2006. The charges totaling $1,750,000 have been reported in the financial statements as a non-operating expense (“Claims”) in the Construction Fund.

Airport Revenue & Expense:

Airport revenue increased by $.9 million primarily due to an increase in automobile parking revenue of $1.6 million, and a Transportation Security Administration grant of $141,000 for police services.

Operating expenses increased by $1.2 million from $11.7 million in 2005 to $12.9 million in 2006. This increase is in part attributable to increased security costs at the Atlantic City International Airport in the amount of $348,000, and operating expenses totaling $200,000 associated with the Authority’s operation of the airport surface parking lot which began on April 1, 2005, and an increase in depreciation expense in the amount of $478,000.

10 Financial Analysis of the Authority’s Statement of Revenues, Expenses and Changes in Net Assets (Continued)

Capital Contributions:

Capital Contributions at the Airport were primarily related to the FAA Airport Improvement grants. Capital Contributions received during the year decreased by $3.7 million. The overall decrease is attributable to a decrease in FAA grant revenue in the amount of $3.6 million, and a decrease in PFC grant revenue in the amount of $158,000.

SOUTH JERSEY TRANSPORTATION AUTHORITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Year Ended December 31, 2006 With Comparative Totals as of December 31, 2005

2006 2005

Operating revenues $ 83,676,217 $ 82,007,410 Operating expenses 77,107,812 72,499,829 Operating Income 6,568,405 9,507,581

Net Non-Operating Revenues (Expenses) Interest revenue 4,704,589 2,914,249 Interest on bonds (13,746,371) (11,986,825) Other non-operating revenues (expenses) (4,565,510) (2,918,463)

Income (Loss) before Capital Contributions (7,038,887) (2,483,458)

Capital Contributions 5,870,999 9,736,593

Change in Net Assets (1,167,888) 7,253,135

Total Net Assets -- Beginning 341,224,056 333,970,921

Total Net Assets -- Ending $ 340,056,168 $ 341,224,056

Financial Analysis of the Authority’s Statement of Cash Flows

The increase in cash used provided by capital and related financing activities related to the following:

x (1) The Authority spent $23.6 million less on capital acquisitions (See increase/decrease in capital asset section for details of Authority capital asset acquisitions during 2006). x (2) The Authority issued $50.3 million of Transportation System Revenue Bonds to finance the construction of the airport parking garage and to redeem the 2005 Subordinated Note in the amount of $10.4 million (See financial highlight section for more information). x (3) The Authority spent $1.7 million more in interest payments on capital debt. x (4) The Authority recorded a cumulative arbitrage rebate liability on the Transportation System Revenue Bonds, Series 2003 in the amount of $1 million during 2006.

Cash used by investing activities increased by $18.1 million because the Authority increased it’s purchase of investments by $44.3 million, increased the sale of investments by $24.0 million, and interest on investments increased by $2.0 million. 11 Financial Analysis of the Authority’s Statement of Revenues, Expenses and Changes in Net Assets (Continued)

SOUTH JERSEY TRANSPORTATION AUTHORITY STATEMENT OF CASH FLOWS Year Ended December 31, 2006 With Comparative Totals as of December 31, 2005

2006 2005

Cash Flows Provided by (Used in):

Operating activities $ 29,080,629 $ 23,286,845 Noncapital financing activities (2,500,000) (2,500,000) Capital and related financing activities 9,032,138 (26,560,732) Investing activities (18,114,284) 317,227

Net increase in cash and cash equivalents 17,498,483 (5,456,660)

Cash and cash equivalents - beginning of the year 33,766,758 39,223,418

Cash and cash equivalents - end of the year $ 51,265,241 $ 33,766,758

Non-cash Capital Financing Activities:

No capital assets were acquired through contributions from governmental agencies and private developers.

Notes to the Financial Statements

The notes provide additional information that is essential to a full understanding of the data provided in the financial statements.

Other Supplementary Information

In addition to the financial statements and accompanying notes, this report also presents certain supplementary information concerning the Authority’s fund financial statements, bonds and other debt, toll revenue and vehicle count.

Contacting the Authority’s Financial Management

This financial report is designed to provide our commissioners, customers, investors and creditors with a general overview of the Authority’s finances and to show the Authority’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Director of Finance at the South Jersey Transportation Authority, Farley Service Plaza, Administration Building, P.O. Box 351, Hammonton, NJ 08037.

12 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF NET ASSETS

December 31, 2006

With Comparative Totals as of December 31, 2005

2006 2005 ASSETS Unrestricted Assets: Cash and Cash Equivalents $ 19,648,657 $ 13,625,386 Investments 3,963,816 2,000,000 Change Funds 39,790 35,891 Interest Receivable 133,231 51,622 Accounts Receivable (net of allowance for uncollectibles) 2,849,547 3,791,789 Grants Receivable 1,707,924 1,450,331 Prepaid Expenses 1,923,581 1,709,176 Fuel Inventory 113,885 72,263

Total Unrestricted Assets 30,380,431 22,736,458

Restricted Assets: Cash and Cash Equivalents 31,576,794 20,105,481 Investments 57,311,722 36,077,202 Grants Receivable 1,437,092 769,759 Interest Receivable 481,818 463,577

Total Restricted Assets 90,807,426 57,416,019

Noncurrent assets: Capital assets: Non-Infrastructure Capital Assets: Land and Improvements 147,321,510 147,321,510 Electronic Toll Equipment 8,917,935 8,917,935 Buildings and Equipment 62,307,942 60,544,752 Less Accumulated Depreciation (38,310,789) (33,866,675) Total Non-Infrastructure Capital Assets 180,236,598 182,917,522 Infrastructure Capital Assets: Infrastructure - Equipment 9,617,363 9,267,040 Infrastructure 391,890,085 388,656,537 Less Accumulated Depreciation (79,165,686) (65,294,114) Total Infrastructure Capital Assets 322,341,762 332,629,463

Construction in Progress 8,875,270 -

Total Capital Assets 511,453,630 515,546,985

Bond Issuance Costs 9,446,844 7,722,445 Less Accumulated Amortization (2,320,401) (1,921,238) Total Non-current Non-capital Assets 7,126,443 5,801,207

Total Noncurrent Assets 518,580,073 521,348,192

TOTAL ASSETS $ 639,767,930 $ 601,500,669

13 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF NET ASSETS

December 31, 2006

With Comparative Totals as of December 31, 2005

2006 2005 LIABILITIES AND NET ASSETS Current Liabilities Payable From Unrestricted Assets: Accounts Payable $ 4,635,550 $ 3,755,752 Deferred Income 416,006 407,981 Escrow Deposits 117,943 115,168 Accrued Expenses 1,176,999 986,316 Reserve for Self Insurance 883,018 -

Total Current Liabilities Payable From Unrestricted Assets 7,229,516 5,265,217

Current Liabilities Payable From Restricted Assets: Accrued Interest 2,239,176 2,135,349 Accounts Payable 3,154,802 1,959,656 Unamortized SWAP Premium 7,041,212 7,509,719 Retainages Payable 650,518 692,031 Due to Other Governmental Agencies 208,334 208,334 PFC Advanced 3,457,761 1,415,357 Economic Recovery Funds Advanced 695,932 848,615 Elevated U-Turn Advance 121,411 121,411 Bonds and Notes Payable, Net of Discount, Premium and Loss on Defeasance ($52,084) 5,335,832 15,597,775

Total Current Liabilities Payable From Restricted Assets 22,904,978 30,488,247

Noncurrent Liabilities: Arbitrage Rebate Payable 1,229,642 184,495 Bonds and Notes Payable, Net of Discount, Premium Loss on Defeasance ($2,139,458) 268,347,626 224,338,654

Total Noncurrent Liabilities 269,577,268 224,523,149

TOTAL LIABILITIES $ 299,711,762 $ 260,276,613

14 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF NET ASSETS

December 31, 2006

With Comparative Totals as of December 31, 2005

2006 2005 NET ASSETS Invested in Capital Assets, Net of Related Debt $ 237,826,510 $ 272,891,217

Restricted for: Debt Service 1,004,365 8,171,436 Rehabilitation and Repair 6,252,267 6,078,242 Debt Service Reserve 18,664,981 16,193,220 State Payment 87 137 Capital Projects 44,357,355 11,603,775

Unrestricted 31,950,603 26,286,027

Total Net Assets 340,056,168 341,224,056

TOTAL LIABILITIES AND NET ASSETS $ 639,767,930 $ 601,500,669

15 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

Twelve Months Ended December 31, 2006

With Comparative Totals as of December 31, 2005

2006 2005

Operating Revenues: Tolls $ 59,477,706 $ 57,970,661 Concessions 2,046,941 1,962,861 ETC Administrative Revenue 1,492,252 1,624,406 Garage Parking 1,291,189 956,416 Marina Parking Revenue 2,846,946 3,653,383 Intercept Parking 351,312 500,929 Bus Permits 344,260 367,546 Rentals 3,789,944 3,652,537 Emergency Service Patrol - 180,000 Directional Signage Program 32,599 - SJTPO Programs 1,832,591 2,178,896 Transportation services 2,095,746 1,988,525 Other 797,578 613,503 Airport 7,277,153 6,357,747

Total Operating Revenues 83,676,217 82,007,410

Operating Expenses Executive 2,188,853 2,772,646 Policy and Planning 466,911 319,354 Engineering 3,209,405 2,945,965 Finance 1,162,221 1,129,904 Central Accounts 11,469,619 9,920,175 Marketing and Communications 974,636 606,357 Tourist Services 6,385,610 6,007,686 Maintenance 5,830,824 5,965,699 Police 6,974,056 5,966,440 Emergency Service Patrol 790,981 715,092 Electronic Toll Collection Expense 3,172,243 3,495,779 Directional Signage Program 32,599 - Parking - (Non Airport) 966,052 834,447 Information Services 1,745,344 1,459,671 SJTPO Programs 1,832,591 2,178,896 Airport 9,332,594 8,603,063 Transportation Services 2,361,480 2,119,024 Depreciation 18,211,791 17,459,628 Total Operating Expenses 77,107,811 72,499,829

Operating Income (Loss) 6,568,405 9,507,581

Non-Operating Revenues (Expenses) Interest Revenue 4,704,589 2,914,248 Gain on Sale of Assets - 50,507 Other Revenue 1,890 - Claims (1,750,000) - Fund Expenses (1,011) (199,592) Amortization Expense (407,027) (371,176) Amortization of Bond Premium 90,637 101,798 Interest on Bonds (13,746,371) (11,986,825) State Payment (2,500,000) (2,500,000)

Total of Non-Operating Revenue (Expenses) (13,607,293) (11,991,040)

Income (Loss) before Capital Contributions (7,038,888) (2,483,459)

Capital Contributions 5,870,999 9,736,590

Change in Net Assets (1,167,888) 7,253,135

Total Net Assets -- Beginning 341,224,056 333,970,921

Total Net Assets -- Ending $ 340,056,168 $ 341,224,056

16 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF CASH FLOWS

Twelve Months Ended December 31, 2006

With Comparative Totals as of December 31, 2005

2006 2005

CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from customers and users $ 83,702,280 $ 80,014,536 Payments to suppliers (31,125,559) (26,373,163) Payments to employees (23,496,092) (30,354,528)

Net cash provided by operating activities 29,080,629 23,286,845

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Payment of State Payment Obligation (2,500,000) (2,500,000)

Net cash (used) by noncapital financing activities (2,500,000) (2,500,000)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Capital contributions 5,867,212 11,207,058 Proceeds from the sale of land - 50,507 Deferred Income-SWAP Premium - 7,747,500 Payments for capital acquisitions (15,373,952) (38,948,820) Principal paid on capital debt (15,650,000) (5,065,000) Proceeds from Notes Issued 47,831,428 10,400,000 Interest paid on capital debt (13,642,546) (11,951,976) Net cash (used) by capital and related financing activities 9,032,142 (26,560,731)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of investments (61,636,703) (17,325,234) Proceeds from sales and maturities of investments 38,917,692 14,977,243 Interest and dividends 4,604,723 2,665,217

Net cash provided by investing activities (18,114,288) 317,226

Net increase in cash and cash equivalents 17,498,483 (5,456,660)

Balances - beginning of the year 33,766,758 39,223,418

Balances - end of the year $ 51,265,241 $ 33,766,758

Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income $ 6,568,405 $ 9,507,585 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense 18,211,790 17,459,628 Change in assets and liabilities: Receivables, net 942,242 (1,731,782) Grants receivable (924,926) (341,395) Prepaid expenses (214,405) (422,573) Inventories (41,622) (54,418) Accounts and other payables 3,454,647 (1,308,071) Deferred income 8,022 30,252 Customer deposits 2,774 (11,057) Reserve for self insurance 883,018 0 Accrued expenses 190,684 158,676 Net cash provided by operating activities $ 29,080,629 $ 23,286,845

17 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF NET ASSETS

PROPRIETARY FUNDS

December 31, 2006

With Comparative Totals as of December 31, 2005

Consolidation Totals Expressway Airport Eliminations 2006 2005 ASSETS Unrestricted Assets: Cash and Cash Equivalents $ 17,668,527 $ 1,980,130 $$19,648,657 $ 13,625,386 Investments 3,963,816 3,963,816 2,000,000 Change Funds 39,790 39,790 35,891 Interest Receivable 124,016 9,215 133,231 51,622 Accounts Receivable 2,152,714 696,833 2,849,547 3,791,789 Grants Receivable 1,707,924 - 1,707,924 1,450,331 Prepaid Expenses 1,539,441 384,140 1,923,581 1,709,176 Fuel Inventory 113,885 113,885 72,263 Interfunds Receivable 11,767,510 1,579,587 (13,347,097) - -

Total Unrestricted Assets 39,077,622 4,649,906 (13,347,097) 30,380,431 22,736,458

Restricted Assets: Cash and Cash Equivalents 21,268,662 10,308,132 31,576,794 20,105,481 Investments 26,604,110 30,707,613 57,311,722 36,077,202 Grants Receivable 1,437,092 1,437,092 769,759 Interfunds Receivable 4,990,140 (4,990,140) - - Interest Receivable 481,818 481,818 463,577

Total Restricted Assets 53,344,729 42,452,837 (4,990,140) 90,807,426 57,416,019

Noncurrent assets: Capital assets: Non-Infrastructure Capital Assets: Land and Improvements 131,701,953 15,619,557 147,321,510 147,321,510 Electronic Toll Equipment 8,917,935 - 8,917,935 8,917,935 Buildings and Equipment 29,771,190 32,536,752 62,307,942 60,544,752 Less Accumulated Depreciation (27,605,639) (10,705,150) (38,310,789) (33,866,675) Total Non-Infrastructure Capital Assets 142,785,440 37,451,158 - 180,236,598 182,917,522 Infrastructure Capital Assets: Infrastructure - Equipment 2,317,550 7,299,813 9,617,363 9,267,040 Infrastructure 339,039,452 52,850,633 391,890,085 388,656,537 Less Accumulated Depreciation (68,204,116) (10,961,571) (79,165,686) (65,294,114) Total Infrastructure Capital Assets 273,152,886 49,188,875 - 322,341,762 332,629,463

Construction in Progress 1,833,355 7,041,915 8,875,270 -

Total Capital Assets 417,771,681 93,681,948 - 511,453,630 515,546,985

Bond Issuance Costs 9,446,844 - 9,446,844 7,722,445 Less Accumulated Amortization (2,320,401) - (2,320,401) (1,921,237) Total Non-current Non-capital Assets 7,126,443 - - 7,126,443 5,801,208

Total Noncurrent Assets 424,898,124 93,681,948 - 518,580,073 521,348,193

TOTAL ASSETS $ 517,320,476 $ 140,784,690 $ (18,337,237) $ 639,767,930 $ 601,500,670

18 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF NET ASSETS

PROPRIETARY FUNDS

December 31, 2006

With Comparative Totals as of December 31, 2005

Consolidation Totals Expressway Airport Eliminations 2006 2005 LIABILITIES AND NET ASSETS Current Liabilities Payable From Unrestricted Assets: Accounts Payable $ 3,712,218 $ 923,332 $$4,635,550 $ 3,755,752 Deferred Income 323,548 92,458 416,006 407,981 Escrow Deposits 69,996 47,947 117,943 115,168 Accrued Expenses 1,174,466 2,533 1,176,999 986,316 Reserve for Self Insurance 883,018 883,018 - Interfunds Payable 13,347,097 (13,347,097) - -

Total Current Liabilities Payable From Unrestricted Assets 6,163,246 14,413,367 (13,347,097) 7,229,516 5,265,217

Current Liabilities Payable From Restricted Assets: Accrued Interest 2,239,176 - 2,239,176 2,135,349 Accounts Payable 1,825,295 1,329,507 3,154,802 1,959,656 Unamortized SWAP Premium 7,041,212 - 7,041,212 7,509,719 Retainages Payable 103,993 546,525 650,518 692,031 Due to Other Governmental Agencies 208,334 - 208,334 208,334 PFC Advanced 3,457,761 3,457,761 1,415,357 Economic Recovery Funds Advanced - 695,932 695,932 848,615 Elevated U-Turn Advance 121,411 - 121,411 121,411 Interfunds Payable - 4,990,140 (4,990,140) - - Bonds and Notes Payable, Net of Discount, Premium and Loss on Defeasance ($52,084) 5,335,832 - 5,335,832 15,597,775

Total Current Liabilities Payable From Restricted Assets 16,875,253 11,019,865 (4,990,140) 22,904,978 30,488,247

Noncurrent Liabilities: Arbitrage Rebate Payable 1,229,642 1,229,642 184,495 Bonds and Notes Payable, Net of Discount, Premium Loss on Defeasance ($2,139,458) 219,000,704 49,346,922 268,347,626 224,338,654

Total Noncurrent Liabilities 220,230,346 49,346,922 - 269,577,268 224,523,149

TOTAL LIABILITIES $ 243,268,845 $ 74,780,154 $ (18,337,237) $ 299,711,762 $ 260,276,613

19 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF NET ASSETS

PROPRIETARY FUNDS

December 31, 2006

With Comparative Totals as of December 31, 2005

Consolidation Totals Expressway Airport Eliminations 2006 2005 NET ASSETS Invested in Capital Assets, Net of Related Debt $ 196,682,760 $ 41,143,750 $$237,826,510 $ 272,891,217

Restricted for: Debt Service 1,004,365 1,004,365 8,171,436 Rehabilitation and Repair 6,252,267 6,252,267 6,078,242 Debt Service Reserve 18,664,981 18,664,981 16,193,220 State Payment 87 87 137 Capital Projects 6,531,769 37,825,586 44,357,355 11,603,777

Unrestricted 44,915,403 (12,964,800) 31,950,603 26,286,029

Total Net Assets 274,051,632 66,004,536 - 340,056,168 341,224,058

TOTAL LIABILITIES AND NET ASSETS $ 517,320,476 $ 140,784,690 $ (18,337,237) $ 639,767,930 $ 601,500,671

20 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

PROPRIETARY FUNDS

Twelve Months Ended December 31, 2006

With Comparative Totals as of December 31, 2005

Consolidation Expressway Airport Eliminations 2006 2005 Operating Revenues: Tolls $ 59,477,706 $ $ $ 59,477,706 $ 57,970,661 Concessions 2,046,941 2,046,941 1,962,861 ETC Administrative Revenue 1,492,252 1,492,252 1,624,406 Garage Parking 1,291,189 1,291,189 956,416 Marina Parking Revenue 2,846,946 2,846,946 3,653,383 Intercept Parking 351,312 351,312 500,929 Bus Permits 344,260 344,260 367,546 Rentals 3,789,944 3,789,944 3,652,537 Emergency Service Patrol - - 180,000 Directional Signage Program 32,599 32,599 - SJTPO Programs 1,832,591 1,832,591 2,178,896 Transportation Services 2,095,746 2,095,746 1,988,525.00 Other 797,578 797,578 613,503 Airport 7,277,153 7,277,153 6,357,747

Total Operating Revenues 76,399,064 7,277,153 - 83,676,217 82,007,410

Operating Expenses Executive 2,188,853 2,188,853 2,772,646 Policy and Planning 466,911 466,911 319,354 Engineering 3,209,405 3,209,405 2,945,965 Finance 1,162,221 1,162,221 1,129,904 Central Accounts 11,469,619 11,469,619 9,920,175 Marketing and Communications 974,636 974,636 606,357 Tourist Services 6,385,610 6,385,610 6,007,686 Maintenance 5,830,824 5,830,824 5,965,699 Police 6,974,056 6,974,056 5,966,440 Emergency Service Patrol 790,981 790,981 715,092 Electronic Toll Collection Expense 3,172,243 3,172,243 3,495,779 Directional Signage Program 32,599 32,599 - Parking-(Non Airport) 966,052 966,052 834,447 Information Services 1,745,344 1,745,344 1,459,671 SJTPO Programs 1,832,591 1,832,591 2,178,896 Airport 9,332,594 9,332,594 8,603,063 Transportation Services 2,361,480 2,361,480 2,119,024 Depreciation 14,557,613 3,654,178 18,211,791 17,459,628

Total Operating Expenses 64,121,038 12,986,772 - 77,107,810 72,499,826

Operating Income (Loss) 12,278,026 (5,709,619) - 6,568,407 9,507,584

Non-Operating Revenues (Expenses) Interest Revenue 4,627,751 76,838 4,704,589 2,914,248 Gain on Sale of Assets - - 50,507 Other Revenue 1,890 1,890 - Claims (1,750,000) (1,750,000) - Fund Expenses (200) (811) (1,011) (199,592) Amortization Expense (407,027) (407,027) (371,175) Amortization of Bond Premium 90,637 90,637 101,798 Interest on Bonds (13,746,374) (13,746,374) (11,986,825) State Payment (2,500,000) (2,500,000) (2,500,000)

Total of Non-Operating Revenue (Expenses) (13,683,323) 76,027 - (13,607,296) (11,991,039)

Income (Loss) before Contributions and Transfers (1,405,298) (5,633,592) - (7,038,890) (2,483,455)

Capital Contributions 3,783 5,867,213 5,870,999 9,736,590 Change in Net Assets (1,401,515) 233,622 - (1,167,891) 7,253,135

Total Net Assets -- Beginning 275,453,147 65,770,914 341,224,056 333,970,921

Total Net Assets -- Ending $ 274,051,632 $ 66,004,536 $ - $ 340,056,168 $ 341,224,056

21 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS

Twelve Months Ended December 31, 2006

With Comparative Totals as of December 31, 2005

Totals Expressway Airport 2006 2005

CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from customers, users and grants $ 76,335,358 $ 7,366,922 $ 83,702,280 $ 80,014,536 Payments to suppliers (23,677,754) (7,447,807) (31,125,561) (26,373,163) Payments to employees (21,722,200) (1,773,890) (23,496,090) (30,354,528)

Net cash provided by operating activities 30,935,404 (1,854,775) 29,080,629 23,286,845

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Payment of State Payment Obligation (2,500,000) - (2,500,000) (2,500,000) Operating subsidies and transfers to other funds (2,784,129) 2,784,129 - -

Net cash provided (used) by noncapital financing activities (5,284,129) 2,784,129 (2,500,000) (2,500,000)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Capital contributions 418,211 5,449,001 5,867,212 11,207,058 Proceeds from the sale of fixed assets - - - 50,507 Deferred Income-SWAP Premium - - - 7,747,500 Payments for capital acquisitions (9,013,926) (6,360,027) (15,373,953) (38,948,820) Principal paid on capital debt (5,250,000) (10,400,000) (15,650,000) (5,065,000) Proceeds from Notes Issued - 47,831,425 47,831,425 10,400,000 Interest paid on capital debt (13,642,546) - (13,642,546) (11,951,976) Net cash provided (used) by capital and related financing activities (27,488,261) 36,520,399 9,032,138 (26,560,731)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of investments (30,929,090) (30,707,613) (61,636,703) (17,325,234) Proceeds from sales and maturities of investments 38,917,692 - 38,917,692 14,977,243 Interest and dividends 4,533,814 70,913 4,604,727 2,665,217

Net cash provided (used) by investing activities 12,522,416 (30,636,699) (18,114,284) 317,226

Net increase in cash and cash equivalents 10,685,430 6,813,054 17,498,483 (5,456,660)

Balances - beginning of the year 28,291,549 5,475,208 33,766,758 39,223,418

Balances - end of the year $ 38,976,979 $ 12,288,262 $ 51,265,241 $ 33,766,758

Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income (loss) $ 12,278,024 $ (5,709,619) $ 6,568,405 $ 9,507,585 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense 14,557,612 3,654,178 18,211,790 17,459,628 Change in assets and liabilities: Receivables, net 868,803 73,439 942,242 (1,731,782) Grants receivable (924,926) - (924,926) (341,395) Prepaid expenses (71,185) (143,220) (214,405) (422,573) Inventories (41,622) - (41,622) (54,418) Accounts and other payables 3,202,619 252,028 3,454,647 (1,308,071) Deferred income (8,306) 16,329 8,022 30,252 Customer deposits 683 2,091 2,774 (11,057) Reserve for self insurance 883,018 883,018 - Accrued expenses 190,684 - 190,684 158,676 Net cash provided by operating activities $ 30,935,404 $ (1,854,775) $ 29,080,629 $ 23,286,845

Noncash capital financing activities: Capital assets of $0 were acquired through contributions from governmental agencies and private developers.

22 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

The South Jersey Transportation Authority (“Authority”) was created in 1991 by the South Jersey Transportation Authority Act (“Act”), Chapter 252 of the Laws of New Jersey. The Authority became the successor to the New Jersey Expressway Authority (“NJEA”) and the Atlantic County Transportation Authority (“ACTA”). Pursuant to the Act, the Authority acquired the Civil Terminal Area of the Atlantic City International Airport as a transportation project. The purpose of the Authority is to coordinate South Jersey’s transportation system in its regional jurisdiction of the counties of Atlantic, Camden, Cape May, Cumberland, Gloucester and Salem, and deal particularly with the highway network, aviation facilities and the transportation problems of Atlantic County.

The Authority’s responsibility is to maintain, repair and operate the 46.4-mile Atlantic City Expressway along with portions of Routes 30, 187, and 42. Other functions of the Authority include those assumed with the acquisition of ACTA as follows: operation of the New York Avenue Parking Garage and related office and commercial space in Atlantic City, New Jersey; bus management; bus and automobile parking; traffic management; and transportation planning in Atlantic County. The Airport Division is responsible for operating and improving the Airport.

The Authority operates under a Board of Commissioners. There are nine Commissioners, comprised of the State Commissioner of Transportation, the CEO and Secretary of the New Jersey Commerce and Economic Growth Commission, and seven members appointed by the Governor with Senate approval. Serving under the Authority’s Commissioners is the Executive Director, supported by two Deputy Directors a Chief of Staff and various Department Directors.

The financial statements of the Authority include all funds controlled by or dependent on the Authority Commissioners in accordance with accounting principles generally accepted in the United States of America.

The Authority is a component unit included in the State of New Jersey’s comprehensive annual financial report.

B. Basis of Accounting

The Authority prepares its financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America for proprietary funds, which are similar to those for private business enterprises. Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, revenues are recorded when earned and expenses are recorded when incurred.

The assets, liabilities, and net assets of the Authority are reported in a self-balancing set of accounts, which include restricted and unrestricted resources, representing funds available for support of the Authority’s operations.

23 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. Basis of Accounting (Continued)

All funds of the Authority follow Financial Accounting Standards Board (“FASB”) Statements and Interpretations issued on or before November 30, 1989, Accounting Principles Board Opinions, and Accounting Research Bulletins, unless those pronouncements conflict with Governmental Accounting Standards Board (“GASB”) pronouncements. The Governmental Accounting Standards Board (“GASB”) issued Governmental Accounting Standards Board Statement (“GASBS”) No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, as amended by GASBS No. 37, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments: Omnibus – an amendment of GASB Statements No. 21 and No. 34, and GASBS No. 38, Certain Financial Statement Note Disclosures. These GASBS’s established a financial reporting requirement for state and local governments throughout the United States. They created new information and restructured much of the information that governments had presented in the past. GASB developed these requirements to make annual financial statements more comprehensive and easier to understand and use. The Authority adopted these GASBS’s effective January 1, 2001. The Governmental Accounting Standards Board also issued GASB Statement No. 40; Deposit and Investment Risk Disclosures. This statement requires the Authority to provide certain disclosures in the notes to the financial statements related to concentration of credit risk, custodial credit risk and interest rate risk.

C. Operating Revenues and Expenses

The Authority’s operating revenues and expenses consist of revenues earned and expenses incurred relating to the operation and maintenance of its Transportation System, which specifically includes the operations of the Atlantic City Expressway and the Atlantic City International Airport. Grant revenues and expenses are included in operations of the Atlantic City Expressway. All other revenues and expenses are reported as non-operating revenues and expenses.

D. Cash and Cash Equivalents

For purposes of the statements of cash flows, demand deposit accounts with commercial banks and cash invested in commercial money market funds (including restricted assets) are considered cash equivalents.

E. Investments

Investments consist of restricted investments, and are carried at fair value as determined in an active market.

24 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

F. Accounts Receivable

Accounts receivable for the Authority is reflected net of allowance for doubtful accounts. The allowance account is adjusted at the end of every year for estimated bad debt expense. The estimate is based on the age of the receivable and the likelihood of its collection.

G. Restricted Assets

Restricted assets of the Authority represent bond proceeds designated for construction, and other monies and assets required to be restricted for debt service, the state payment, arbitrage rebate, rehabilitation and repair, subordinated debt, and capital projects.

H. Basis of Organization: Description of Funds

The accounts of the Authority are organized on the basis of funds, each of which is a separate entity with its own self-balancing accounts that comprise its assets, liabilities, net assets, revenue, and expenses. Resources are accounted for in individual funds based upon the purpose for which they are to be spent and the restrictions, if any, on the spending activities. The accrual basis of accounting in accordance with generally accepted accounting principles is used for all of the aforementioned funds, which are consolidated and reported as Proprietary Funds in the accompanying financial statements.

The Authority is subject to the provisions and restrictions of the second amended and restated resolution authorizing revenue bonds and other obligations adopted April 19, 2005. A summary of the activities of each Fund created by the Bond Resolution is covered below.

Revenue Fund – accounts for resources and expenditures for Authority operations of a general nature. The Revenue fund contains two sub-funds; one relating to revenue and expenses of the SJTPO and one relating to revenue and expenses of Transportation Services Program (see footnotes 17 and 23 for further details).

Construction Fund – accounts for the receipt and disbursement of funds for the acquisition and construction of capital projects. Included in this Fund are proceeds from the issuance of Transportation System Revenue Bonds in 1999, 2004 and 2006, as well as receipt of federal, state grants and other contributed capital.

Debt Service Fund – accounts for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs.

25 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

H. Basis of Organization: Description of Funds (Continued)

Debt Service Reserve Fund – must maintain an amount equal to the Debt Service requirement. The monies in this fund are utilized to make up any deficiency in the Debt Service Fund. In accordance with the Bond Resolution, the Authority may maintain a surety bond or an insurance policy payable to the trustee in lieu of required cash deposit in the Debt Service Reserve. As of 12/31/06, the Authority maintained a Municipal Bond Debt Service Reserve Insurance Policy with Financial Security Assurance with a payment limit of $2,289,600 and investments of $18,382,383. The total of which exceeds the Debt Service Reserve requirement of $18,880,963.

Rehabilitation and Repair Fund – accounts for monies that shall be applied to pay the costs of major resurfacing, repairs, renewals or reconstruction of each Pledged Project or any part thereof, whether buildings, improvements, fixtures, or equipment as determined in writing by the Authority and filed with the Trustee. The Authority is required to maintain a minimum balance of $6,000,000 at December 31, 2006.

State Payment Fund – accounts for the accumulation of resources for, and the payment of, the Authority’s State payment obligation.

Rebate Fund – established for the purpose of paying to the United States Treasury, the Rebatable Arbitrage or the penalty amount in lieu of rebate and, if elected, any amount required to terminate such penalty.

Subordinated Debt Fund – the Authority may at anytime, or from time to time, issue subordinated debt secured by amounts on deposit from the Subordinated Debt fund or the General Reserve Fund.

General Reserve Fund – makes up deficiencies in payments to the other funds to cover operating expenses of any general project or for any other corporate purpose of the Authority permitted by the Act.

Airport Revenue Fund – accounts for the resources and expenditures of the Atlantic City International Airport.

26 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

I. Interest Income on Funds

Pursuant to Article I of the Bond Resolution, all earnings on the investment of monies in other funds are eligible to be included as revenues in the Revenue Fund subject to Section 5.14 of the Bond Resolution which restricts the transfer of earnings on investments in the General Reserve Fund to first being applied to other funds to meet any deficiencies in funding requirements. Earnings on the Debt Service, Debt Service Reserve (after all required transfers have been made to the Construction Fund), Rehabilitation and Repairs and State Payment Funds shall be transferred to the Revenue Fund if such Funds are at their requirements.

Earnings in the Construction Fund shall remain there until the project to which such earnings relate has been substantially completed at which time any excess funds may be transferred to other accounts established in the Construction Fund or, if no other account is so specified, (1) the Debt Service Reserve Fund if such fund shall be below the Debt Service Requirement, and (2) the Rehabilitation Fund, to the extent of any remaining balances of such monies.

J. Inability to Meet Debt Service Requirements

If amounts held in the Debt Service Fund are insufficient to pay the Debt Service Requirement coming due on bonds, the Trustee shall transfer from the following funds an amount sufficient to eliminate such deficiency: the Debt Service Reserve Fund, the State Payment Fund, the Rehabilitation and Repair Fund, the Subordinated Debt Fund, and the General Reserve Fund.

K. Pledged and General Projects

Pledged Projects are the projects for which the 2003 and 2004 Bonds were issued (except for the project constituting the acquisition of the parking garage facility) and, in addition to those projects, a project

(a) which generates revenues sufficient to pay the operating expenses and Rehabilitation and Repair Requirement associated with such project in the fiscal year in which such project becomes operational or is designated a Pledged Project by the Authority; and

(b) which is reasonably projected by the Authority to generate revenues sufficient to pay such project’s associated operating expenses and rehabilitation and repair requirement for each of the five fiscal years following the year in which such project becomes operational or is designated a Pledged Project by the Authority.

General Projects are projects that do not generate revenues sufficient to fully pay associated operating expenses and rehabilitation and repair requirements. General Projects may become Pledged Projects if they meet certain net revenue tests. The Airport and the New York Avenue Parking Garage are General Projects. Since the Airport Parking Garage Project is related to the Airport, such projects are considered General Projects under the Resolution.

27 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

L. Budgetary Information

In accordance with Section 7.06 of the Bond Resolution, on or before the fifteenth day of each year, the Authority adopts by resolution an Annual Operating Budget for such year. All operating appropriations lapse at the end of such year. As with all resolutions of the Authority, the budget resolution is subject to a fifteen-day Governor’s veto period. The resolution comes into full force and effect if no veto is exercised.

The Budget is prepared at the Department Division level. All Division Managers are responsible for maintaining expenditures below budget. The Department Directors may make line-item transfers of appropriations within their departments. All line-item transfers must be approved in writing by the Executive Director. The accounting system will not allow charges to accounts where the budget is expended.

M. Fuel Inventory

Inventory consists of fuel for the Authority’s vehicles valued at cost of the most recent purchases.

N. Capital Assets

Cost Basis – All capital assets are recorded at historical cost. The cost of property and equipment includes costs for infrastructure assets, right-of-way, land and improvements, electronic toll equipment, buildings, and equipment (including software). Costs for infrastructure assets include construction costs, design and engineering fees, legal and administrative expenses paid from construction monies, and bond interest expense, net of bond interest income, incurred during the period of construction. Idle assets, if any, are carried at original cost until they are disposed of.

Capitalization Policy – Costs to construct or acquire additional capital assets, which in some cases replace existing assets or otherwise prolong their useful lives, are capitalized for buildings and improvements, electronic toll equipment, and other equipment (including software). Under the Authority’s policy of accounting for infrastructure assets pursuant to the “depreciation method of accounting,” property costs represent a historical accumulation of costs expended to acquire rights-of-way and to construct, improve, and place in operation the various projects and related facilities. The authority has established that capital expenditures with an original unit cost of at least $5,000, with a useful life of three years or greater are required to be capitalized.

28 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

N. Capital Assets (Continued)

Construction in Progress – Costs related to the construction of capital assets that have been classified as ongoing projects, and are not being used for their intended purpose have been reported as Construction in Progress. These assets are not being depreciated until the Authority has determined that they are substantially completed and are being utilized for their intended purpose. At that time, the costs will be re-classified to their respective asset class and depreciated in accordance with the depreciation policy noted below.

Depreciation Policy – The Authority depreciates its assets using the straight-line method over the estimated useful lives of the assets as follows:

Infrastructure 30 years Infrastructure- Equipment 10 years Buildings 30 years Building Improvements 5 to 10 years Electronic Tolls 10 years Vehicles and Equipment 5 years

O. Bond Discount, Premium and Amortization of Issuance Costs

Bond discounts are presented as a reduction of the face amount of revenue bonds payable, whereas issuance costs are recorded as other assets. Bond discounts, premiums and issuance costs are associated with the issuance of bonds and are amortized using the bonds outstanding method.

P. Restricted Net Assets

Restricted net assets are comprised of amounts reserved for debt service, debt service reserve, arbitrage rebate, rehabilitation and repair, capital projects and state payment fund.

29 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

2. DEPOSITS AND INVESTMENTS

Pursuant to Article VI, Sections 6.02(a) and (b) and Section 6.03 of the Authority’s Bond Resolution, all monies held by any depository may be placed on demand or time deposit, as directed by the Authority, provided that such deposits shall permit the monies so held to be available for use when needed.

All monies held by the Trustee, or any other fiduciary, or any depository shall be insured by the Federal Deposit Insurance Corporation and to the extent not so insured, shall be continuously and fully secured either by federal securities having a market value of not less than the amount of such monies or in such other manner as may then be required by applicable federal or state laws and regulations to provide security for the deposit of public funds.

All investments shall be made in “investment securities” as defined by Article I, Section 1.01 of the Bond Resolution and shall mature or become subject to repurchase, withdrawal without penalty or redemption at the option of the holder on or before the dates the invested amounts are reasonably expected to be needed.

Article I, Section 1.01 of the Authority’s Bond Resolution provides a list of investment securities that may be purchased by the Authority. The investment securities, as defined by the Bond Resolution, consist of the following:

(a) Federal securities;

(b) Bonds, debentures, notes or other evidence of indebtedness issued by any agency or instrumentality of the United States to the extent such obligations are guaranteed by the United States or by another such agency, the obligations (including guarantees) of which are guaranteed by the United States;

(c) Bonds, debentures, notes or other evidence of indebtedness issued by any corporation chartered by the United States, including but not limited to: Government National Mortgage Association, Federal Land Banks, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Federal Home Loan Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Tennessee Valley Authority, United States Postal Service, Farmers Home Administration, Resolution Funding Corporation, Export-Import Bank, Federal Financing Bank, and Student Loan Marketing Association;

(d) Negotiable or non-negotiable certificates of deposit (or other time deposit arrangements) issued by any bank, trust company or national banking association, including a Fiduciary, which certificates of deposit shall be continuously secured or collateralized by obligations described in (a) or (b) above, which shall have a market value at all times at least equal to the principal amount of such certificates of deposit and shall be lodged with the Trustee, as custodian, by the bank, trust company or national banking association issuing such certificates of deposit;

30 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

2. DEPOSITS AND INVESTMENTS (CONTINUED)

(e) Uncollateralized negotiable or non-negotiable certificates of deposit (or other time deposit arrangements) issued by any bank, trust company or national banking association, the unsecured obligations of which are rated in one of the two highest rating categories, without regard to sub-categories, by Moody’s and Standard & Poor’s (“S&P”);

(f) Repurchase agreements collateralized by obligations described in (a), (b) or (c) with any registered broker/dealer subject to the Securities Investors’ Protection Corporation jurisdiction, which has an uninsured, unsecured and unguaranteed obligation rate of “Prime-1" or “A-3" or better by Moody’s, and “A-1" or “A” or better by S&P, or any commercial bank with the above ratings, provided:

(i) a master repurchase agreement or specific written repurchase agreement governs the transaction which characterizes the transaction as a purchase and sale of securities;

(ii) the securities are held free and clear of any lien, by the Trustee or an independent third party acting solely as agent for the Trustee, and such third party is a Federal Reserve Bank, a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus, and undivided profits of not less than $75,000,000, or a bank approved in writing for such purpose by each credit issuer, if any, and the Trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Trustee;

(iii) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 CFR 306.1 et seq. or 31 CFR 350.0 et seq. or a successor provision in such securities is created for the benefit of the Trustee;

(iv) the repurchase agreement has a term of six months or less, or the Authority will value the collateral securities no less frequently than monthly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two business days of such valuation;

(v) the repurchase agreement matures on or before a debt service payment date (or, if held in a fund other than the Debt Service Fund, Debt Service Reserve Fund or Subordinated Debt Fund, other appropriate liquidation period); and

(vi) the fair market value of the securities in relation to the amount of the repurchase obligation is equal to the collateral levels established by a rating agency for the ratings assigned by the rating agency to the seller.

31 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

2. DEPOSITS AND INVESTMENTS (CONTINUED)

(g) Banker’s acceptances, Eurodollar deposits and certificates of deposit, in addition to the certificates of deposit provided for by (d) and (e) above of the domestic branches of foreign banks having a capital and surplus of $1,000,000,000 or more, or any bank or trust company organized under the laws of the United States of America or Canada, or any state or province thereof, having capital and surplus, in the amount of $1,000,000,000, provided that the aggregate maturity value of all such banker’s acceptances and certificates of deposit held at any time as investments of funds under the Bond Resolution with respect to any particular bank, trust company, or national association shall not exceed 5% of its capital and surplus; and provided further that any such bank, trust company, or national association shall be rated in one of the two highest rating categories, without regard to rating sub-categories, by Moody’s and S&P;

(h) Other obligations of the United States of America or any agency thereof which may then be purchased with funds belonging to the State of New Jersey or which are legal investments for savings banks in the State of New Jersey;

(i) Deposits in the New Jersey Cash Management Fund;

(j) Obligations of any state, commonwealth or possession of the United States or a political subdivision thereof of any agency or instrumentality of such a state, commonwealth, possession or political subdivision, provided that at the time of their purchase such obligations are rated in either of the two highest rating categories by both Moody’s and S&P;

(k) Commercial paper with a maturity date not in excess of 270 days rated by the rating agencies at least equal to the rating assigned by the rating agencies to the applicable series of bonds and in no event lower than the “A” category established by a rating agency (which may include sub-categories indicated by plus or minus or by numbers) at the time of such investment, issued by an entity incorporated under the laws of the United States or any state thereof;

(l) Shares of diversified open-end management investment company as defined in the Investment Act of 1940, which is a money-market fund which is then rated in any of the three highest rating categories by any nationally recognized bond rating agency which is then rating the bonds or money-market accounts of the Trustee or any bank or trust company organized under the laws of the United States or any state thereof which has a combined capital and surplus of not less than $50,000,000; and

32 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

2. DEPOSITS AND INVESTMENTS (CONTINUED)

(m) Investment contracts

(i) providing for the future purchase of securities of the type described in (a), (b), (c), and (g) above, which contacts have been approved for sale by a national securities exchange and all regulatory authorities having jurisdiction; or

(ii) the obligor under which or the guarantor thereof shall have a credit rating such that its long-term debt is rated at least “A+” by S&P if the bonds are then rated by such rating agency and at least “A-1" by Moody’s if the bonds are then rated by such rating agency.

"Federal Securities" shall mean (i) any direct and general obligations of, or any obligations guaranteed by, the United States of America, including but not limited to interest obligations of the Resolution Funding Corporation or any successor thereto, (ii) any obligations of any state or political subdivision of a state ("Refunded Bonds") which are fully secured as to principal and interest by an irrevocable pledge of moneys or direct and general obligations of, or obligations guaranteed by, the United States of America, which moneys or obligations are segregated in trust and pledged for the benefit of the holders of the Refunded Bonds, and (iii) certificates of ownership of the principal or interest of direct and general obligations of, or obligations guaranteed by, the United States of America, which obligations are held in trust by a commercial bank which is a member of the Federal Reserve System.

All monies held under the Bond Resolution shall be continuously and fully secured by lodging, as collateral security, direct obligations of or obligations guaranteed by the United States of America having a market value not less than the amount of such monies. The Authority’s total book (cash) balances were $112,540,779 at December 31, 2006. The Authority’s total bank (cash) balances were $115,587,954 at December 31, 2006. The difference between bank balance and book balance is due primarily to the timing of deposits and outstanding checks.

In accordance with GASB 40 the Authority is also required to disclose custodial credit risk, concentration of credit risk, and interest rate risk of its investments.

33 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

2. DEPOSITS AND INVESTMENTS (CONTINUED)

Concentration of Credit Risk:

Concentration of credit risk is the inability to recover the value of deposit, investment, or collateral securities in the possession of an outside party caused by a lack of diversification. The Authority’s Investment Policy does not limit the amount of funds that can be in invested with any one financial institution or issuer. However, the Authority mitigates concentration of credit risk by depositing cash and purchasing investments among several financial institutions. The following schedule lists the allocation of cash and investments by financial institution.

Institution/Issuer Amount % of Portfolio

Federal National Mortgage Association $ 5,327,893 4.7% Federal Home Loan Mortgage Discount Note 5,926,678 5.3% U.S. Treasury Bill 178,836 0.2% Societe Generale 14,324,938 12.7% FSA Capital Management 1,791,168 1.6% Sovereign Bank 3,201,670 2.8% Wachovia Bank, NA 20,071,504 17.8% Bank of New York 29,350,057 26.1% NJ Cash Management Fund 831,481 0.7% Commerce Bank 448,694 0.4% Citizen's Bank 31,048,070 27.7% Change Funds 39,790 0.0% $ 112,540,779 100.0%

34 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

2. DEPOSITS AND INVESTMENTS (CONTINUED)

Custodial Credit Risk:

Custodial credit risk is the risk that in the event of a failure of a depository financial institution or counterparty to a transaction, the Authority will not be able to recover the value of its investment. The Authority mitigates this risk by depositing or investing the majority of its funds available for investment in insured or collateralized investments or in pooled investments of US government securities as well as investing in high rated uncollateralized financial instruments. All of the uncollateralized and uninsured investments are in a certificate of deposit with Citizens Bank and are subject to an agreement securing Public Deposits between the Authority, the Bank and the Trustee, dated January 23, 2006. This certificate of deposit is an unsecured obligation of the bank and rated AA- from S&P and Aa2 from Moody’s . If the Bank’s unsecured obligations shall at any time fail to be rated in one of the two highest rating categories, without regard to rating sub-categories, of Moody’s and S&P, the Bank, within 3 days of such event, shall fully collateralize the Certificate with “Permitted Collateral”, the fair market value of which obligations shall be at least equal to 105% of the sum of (a) the then outstanding principal balance of the Certificate, plus (b) accrued and unpaid interest thereon (the Certificate” and such Permitted Collateral pledged as security for the Certificate). The Authority’s cash and investments were exposed to custodial credit risk as follows:

Insured $ 500,000 Collaterialized: Collateral held by pledging bank in Authority's Name 36,087,610 Collateral held by pledging bank not in the Authority's Name 3,101,670 Pooled Investments 30,530,232 Government Securities 11,433,407 Change Funds 39,790 Uncollateralized and Uninsured 30,848,070 $ 112,540,779

35 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

2. DEPOSITS AND INVESTMENTS (CONTINUED)

Interest Rate Risk:

Interest rate risk is the possibility that an interest rate change could adversely affect an investment’s fair value. The Authority manages interest rate risk on its short-term investments by keeping the weighted average maturity (WAM) of its short term investments below one year. The weighted average maturity is calculated taking into consideration the maturity dates of the securities in the consolidated portfolio. On December 31, 2006, the Authority’s weighted average maturity on its short-term investments was as follows: Weighted Average Fair Value Maturity 12/31/06 (Years) Federal Home Loan Mortgage Discount Notes $ 5,926,678 0.51 Federal National Mortgage Association Notes 4,941,770 0.42 U.S. Treasury Bill 178,836 0.07 $ 11,047,284

The Authority’s long term investments are all related to amounts on deposit in the debt service reserve fund. The Authority mitigates interest rate risk on its long term investments by trying to match the life of these investments to the life of the debt related to these investments through the use of guaranteed investment contracts and long-term treasury obligations.

The Authority is a party to three guaranteed investment contracts totaling $16,116,106. The first one, which relates to the 2003 Refunding Bonds, has a year-end carrying value of $1,791,169, a fixed interest rate of 4.13% and matures on 10/30/12 at a value of $2,289,600. This investment was awarded based on the provider who required the lowest cash deposit to yield a value of $2,289,600 on 10/30/2012. The proceeds of this investment at maturity will be deposited in the debt service reserve fund to replace a debt service surety bond currently in place which expires on 10/31/12. The second contract, which relates to the 1999 Transportation System Revenue Bonds, has a year end carrying value of $12,885,763, a fixed rate of 5.905% and matures on 11/1/29. This investment is restricted to the bond yield of 5.2059%. The excess earnings on this investment are rebated to the IRS every five years in accordance with IRS arbitrage regulations. The third contract, which relates to the 2004 Transportation System Revenue Bonds, has a year end carrying value of $1,439,175, a fixed rate of 4.14% and matures on 11/1/33. The yield on this investment is less that the bond yield of 5.044%. The Authority also has an investment in a Federal Home Loan Mortgage Corporation Discount Note in the face amount of $2,282,000. This investment relates to the 2006A Transportation System Revenue Bonds. The investment matures on 11/17/2015. Earnings on this investment are restricted to the bond yield of 4.783034%. This investment is timed to mature within 30 days of the optional redemption date of the 2006A Transportation System Revenue Bonds of November 1, 2015.

36 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

3. ACCOUNTS RECEIVABLE

Accounts receivable consist of user fees and other amounts from private entities. The following provides a summary of the amounts of accounts and other receivables:

2006 2005 Airport user fees $ 696,833 $ 770,272 Transportation services user fees 102,535 48,486 EZ-Pass toll revenue receivables 787,351 711,100 Casino Reinvestment Development Authority 691,483 1,844,743 Billboard lease receivable 318,509 250,927 Other expressway user fees 336,564 188,119 Gross receivables 2,933,275 3,813,647 Less: Allowance for Uncollectibles (83,728) (21,858)

Net total receivables $ 2,849,547 $ 3,791,789

4. CAPITAL ASSETS

Capital assets for the year ended December 31, 2006 were as follows:

December 31, December 31, 2005 Additions Deletions 2006 Capital Assets not being Depreciated: Land $ 147,321,510 $ $ $ 147,321,510 Construction in Progress - 8,875,270 8,875,270 Total Capital Assets not being Depreciated 147,321,510 8,875,270 - 156,196,780 Non-Infrastructure Capital Assets: Electronic Toll Equipment 8,917,935 8,917,935 Buildings and Equipment 60,544,752 1,875,069 (111,879) 62,307,942 Total Non-Infrastructure Capital Assets 69,462,687 1,875,069 (111,879) 71,225,877 Infrastructure Capital Assets: Infrastructure Equipment 9,267,040 357,905 (7,582) 9,617,363 Infrastructure 388,656,537 3,233,548 391,890,085 397,923,577 3,591,453 (7,582) 401,507,448 Less: Accumulated Depreciation (99,160,789) (18,630,384) 314,698 (117,476,475)

Total Capital Assets $ 515,546,985 $ (4,288,592) $ 195,237 $ 511,453,630

37 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

5. CAPITAL CONTRIBUTIONS

The Authority received Capital Contributions totaling $5,870,999 in 2006, a significant portion of these contributions detailed as follows:

The Authority receives capital funding from the United States Department of Transportation Federal Aviation Administration (“FAA”) and the New Jersey Economic Development Authority and the State of New Jersey Transportation Trust Fund. These funds, as well as other local funds received, are designated and utilized towards the development and improvement of the Atlantic City International Airport and other expressway projects. The Authority received a total of $5,583,393 in total from the Federal Aviation Administration and the New Jersey Economic Development Authority as Economic Recovery Funds during 2006. Funds from the New Jersey Economic Development Authority are classified as Economic Recovery Funds Advanced until costs are incurred. The Authority also received a total of $81,000 from the New Jersey Air National Guard. At the time costs are incurred, they are reclassified to Capital Contributions.

The Authority has been approved by the Federal Aviation Administration (“FAA”) to impose a Passenger Facility Charge (“PFC”) of $4.50 on passengers enplaned at the Atlantic City International Airport. This rate was increased from $3.00 to $4.50 per enplanement effective December 1, 2005. PFC collections, including any interest earned after such collections, may be used only to finance the allowable costs of approved projects at the Airport. PFC collections are classified as PFC Advanced until allowable costs are incurred. The Authority collected $1,772,983 in PFC fees during 2006. The balance of PFC Advance at December 31, 2006 was $3,457,761. At the time costs are incurred, they are reclassified to Capital Contributions.

6. COMMITMENTS AND CONTINGENCIES

A. The Authority recognizes expenses when they are incurred. Commitments do not constitute expenses or liabilities; they relate to unperformed contracts for goods or services. As of December 31, 2006, commitments for projects in progress were $40,412,917.

B. The Authority is the subject of, or a party to, various pending or threatened legal actions. The Authority believes that any ultimate liability arising from these legal actions should not have a material effect on its financial position or operations.

C. The Authority receives financial assistance from the State of New Jersey and the U.S. Government in the form of grants. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditures of the funds for eligible purposes. Substantially all grants, entitlements and cost reimbursements are subject to financial and compliance audits by grantors. As a result of these audits, costs previously reimbursed could be disallowed and require repayment to the grantor agency. As of December 31, 2006, the Authority estimates that no material liabilities will result from such audits.

38 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

7. ACCOUNTS PAYABLE

Accounts payable consists of unrestricted liabilities and restricted liabilities. The following provides a summary of the amounts of accounts payable at December 31, 2006:

2006 2005 Unrestricted:

Electronic toll collection expense $ 1,033,587 $ 1,065,469 State, and local police expenses 1,119,030 1,055,138 Payroll liabilities 514,580 311,240 Airport 256,219 338,804 SJTPO 147,953 23,701 Expressway operating expenses 1,564,181 961,400 $ 4,635,550 $ 3,755,752

Restricted:

Airport- Interim baggage building $ 1,061,499 $ 231,625 Legal settlement expense 750,000 - Various expressway improvements 1,075,295 1,009,379 Other airport terminal improvements 268,008 718,652 $ 3,154,802 $ 1,959,656

8. BONDS AND NOTES PAYABLE

As of December 31, 2006, unamortized bond discounts in the amount of $2,276,363, unamortized loss on refunding in the amount of $143,330, and unamortized bond premium of $228,151, have been offset against the outstanding bonds.

2006 Series A Transportation System Revenue Bonds

On January 12, 2006, the Authority issued Transportation System Revenue Bonds, 2006 Series A, in the principal amount of $50,365,000. Proceeds of the 2006 Series A Bonds were used to finance (i) the construction of a multi-level parking garage containing approximately 1,400 parking spaces located in front of the passenger terminal at the Atlantic City International Airport, including the construction of a fare collection system capable of accepting E-ZPass as a method of payment; (ii) the redemption of the Authority’s $10,400,000 Subordinated Notes, Series 2005, dated March 30, 2005 and due March 29, 2006 including interest thereon; (iii) the amount required to increase the amount on deposit in the Debt Service Reserve Fund to the Debt Service Reserve Requirement; (iv) a portion of the interest on the 2006 Series A Bonds for approximately twenty-four months; and (v) certain costs of issuing the 2006 Series A Bonds. The 2005 Subordinate Notes along with interest expense were repaid on February 16, 2006.

39 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

8. BONDS AND NOTES PAYABLE (CONTINUED)

2006 Series A Transportation System Revenue Bonds

Optional Redemption

The 2006 Series A Bonds will be subject to redemption prior to their stated maturity date at the option of the Authority, on any date on or after November 1, 2015, either in whole or in part by lot, at a redemption price of one hundred percent (100%) of the principal amount thereof, without premium, plus accrued interest thereon to the date fixed for redemption. In the event of any optional redemption of the 2006 Series A Bonds in part, the amount of 2006 Series A Bonds redeemed shall be credited against the remaining Sinking Fund Installments thereafter to become due in such years and amounts as shall be determined by the Authority in its discretion.

Mandatory Sinking Fund Redemption

The 2006 Series A Bonds are subject to mandatory sinking fund redemption prior to maturity at a redemption price of 100% of the principal amount thereof being redeemed, without premium, plus accrued interest to the redemption date, on the following dates in the respective principal amounts set forth opposite such dates:

Year Due Principal Year Due Principal (November 1) Amount (November 1) Amount

2030$ 7,065,000 2033$ 8,055,000 2031 7,380,000 2034 9,855,000 2032 7,710,000 2035 10,300,000

Subordinated Notes, Series 2005

On March 29, 2005, Subordinated Notes, Series 2005 in the amount of $10,400,000 were issued to fund the settlement reached in connection with litigation related to the Airport Parking Garage Project which resulted in the acquisitions of surface lot improvements at Atlantic City International Airport. The Subordinated Notes, Series 2005 has an interest rate of 3.10% and were due to mature on March 29, 2006. On February 16, 2006, the Notes were repaid in connection with the permanent financing secured for the Airport Parking Garage Project.

2004 Series A Transportation System Revenue Bonds

The 2004 Series A Transportation System Revenue Bonds (serial bonds) of $10,300,000 have interest rates ranging from 2.25% to 5% and mature in various increments November 1, 2004 through November 1, 2022. The 2004 Series A term bond of $11,935,000 matures November 1, 2033, and has an interest rate of 5.15%.

40 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

8. BONDS AND NOTES PAYABLE (CONTINUED)

Proceeds of the 2004 Series A Bonds were used to; (i) fund improvements to a 425- space surface parking lot located at Fairmount Avenue and Mississippi Avenue in the City of Atlantic City, Atlantic County, New Jersey; (ii) fund the implementation of express E-ZPass on the Atlantic City Expressway; (iii) fund improvements to the surface parking lot located on Atlantic Avenue between Missouri Avenue (Christopher Columbus Drive) and Mississippi Avenue, in Atlantic City as part of the Expressway Project; (iv) fund other improvements to the Expressway Project included in the Authority’s capital plan for 2004 through 2008; (v) finance the amount required to increase the amount on deposit in the Debt Service Reserve Fund to the Debt Service Reserve Requirement; and (vi) pay certain costs of issuing the 2004 Series A Bonds.

The 2004 Series A Bonds maturing on or before November 1, 2014 will not be subject to redemption prior to their stated maturity dates. The 2004 Series A Bonds maturing on or after November 1, 2015 will be subject to redemption prior to their stated maturity dates at the option of the Authority, on any date on or after November 1, 2014, either in whole or in part by lot within a maturity from maturities selected by the Authority, at a redemption price of one hundred percent (100%) of the principal amount thereof, without premium, plus accrued interest thereon to the date fixed for redemption.

2004 Series A Transportation System Revenue Bonds

The 2004 Series A Bonds maturing on November 1, 2033 are subject to mandatory sinking fund redemption prior to maturity at a redemption price of 100% of the principal amount thereof being redeemed, without premium, plus interest accrued to the redemption date, on the following dates in the respective principal amounts set forth opposite such dates:

Year Due Principal November 1, Amount 2023$ 840,000 2024 880,000 2025 925,000 2026 975,000 2027 1,020,000 2028 1,075,000 2029 1,125,000 2030 1,180,000 2031 1,240,000 2032 1,305,000 2033 1,370,000

41 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

8. BONDS AND NOTES PAYABLE (CONTINUED)

1999 Series Transportation System Revenue Bonds

The 1999 Series Transportation System Revenue Bonds (serial bonds) original issue of $87,435,000 have interest rates ranging from 3.2% to 5.25% and mature in various increments November 1, 2002 through November 1, 2019. The 1999 Series term bonds of $29,290,000 and 87,795,000 mature November 1, 2022 and 2029, respectively and have interest rates of 5.125% and 5%, respectively.

Proceeds of the 1999 Series Bonds were used to: (i) fund certain road improvement projects, (ii) prepay the Authority’s Subordinated Bond Anticipation Notes, Series 1998, (iii) advance refund a portion of certain maturities of the Authority’s Transportation System Revenue Bonds, 1992 Series B (Tax Exempt), (iv) fund a portion of the interest on the 1999 Bonds to May 1, 2001, (v) make a deposit to the Debt Service Reserve Fund and (vi) pay certain costs of issuing the 1999 Bonds.

The 1999 Bonds maturing on or before November 1, 2009, are not subject to redemption prior to maturity. The 1999 Bonds maturing on or after November 1, 2010, are subject to redemption, at the option of the Authority, at any time in whole or in part selected by lot within a maturity from maturities selected by the Authority, on and after November 1, 2009, at the redemption prices (expressed as percentages of the principal amount being redeemed) set forth below, plus accrued interest to the redemption date:

Redemption Period of the Bonds (both dates inclusive) Redemption Price

November 1, 2009 to October 31, 2010 101% November 1, 2010 to October 31, 2011 100 ½% November 1, 2011 and thereafter 100%

Mandatory Sinking Fund Redemption Provision – 1999 Bonds Maturing 11/1/2022

The Bonds shall be subject to redemption prior to maturity by application of Sinking Fund Installments on November 1 in each of the following years in the respective principal amount set opposite each such year:

2020 $ 9,280,000 2021 9,755,000 2022 10,255,000

42 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

8. BONDS AND NOTES PAYABLE (CONTINUED)

Mandatory Sinking Fund Redemption Provisions – 1999 Bonds Maturing 11/1/2029

The Bonds shall be subject to redemption prior to maturity by application of Sinking Fund Installments on November 1 in each of the following years in the respective principal amount set opposite each such year:

Year Due Principal Amount 2023 $ 10,785,000 2024 11,320,000 2025 11,890,000 2026 12,485,000 2027 13,105,000 2028 13,760,000 2029 14,450,000

Schedule of Annual Debt Service for Principal and Interest for Bonded Debt Issued and Outstanding:

Bonds Payable: Calendar Year Principal Interest * Total 2007 $ 5,440,000 $ 13,435,056 $ 18,875,056 2008 5,655,000 13,221,431 18,876,431 2009 5,895,000 12,982,381 18,877,381 2010 6,145,000 12,730,069 18,875,069 2011 6,420,000 12,453,688 18,873,688 2012-2016 37,395,000 56,983,975 94,378,975 2017-2021 47,775,000 46,599,338 94,374,338 2022-2026 61,155,000 33,225,694 94,380,694 2027-2031 61,400,000 16,754,950 78,154,950 2032-2035 38,595,000 4,458,575 43,053,575 $ 275,875,000 $ 222,845,157 $ 498,720,157

* Includes capitalized interest from the proceeds of the 2006 Series A Bonds in the amounts of $2,062,477 and $515,612, respectively, for the bond years ending 2007 and 2008, respectively.

43 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

8. BONDS AND NOTES PAYABLE (CONTINUED)

Swaptions

In May 2005, the Authority adopted a swap management policy, the purpose of which was to set forth the parameters in which interest rate swaps and other derivative financial instruments would be used to better manage its assets and liabilities.

Objective of the swaptions –The Authority intends to execute interest rate swaps if the transaction can be expected to result in the following:

x Hedging to reduce exposure to changes in interest rates on a particular financial transaction. x Reduction in interest rate risk in order to better manage the Authority’s overall asset/liability balance. x Obtain a lower net cost of borrowing with respect to the Authority’s debt. x Manage variable interest rate exposure consistent with prudent debt practices. x Manage exposure to changing market conditions in advance of anticipated bond issues (through the use of anticipatory hedging instruments). x Achieve more flexibility in meeting overall financial objectives than could be achieved in conventional markets.

The Authority will not enter into interest rate swaps for speculative purposes. The Authority will enter into interest rate swaps only in connection with a specified bond issue.

In June of 2005, the South Jersey Transportation Authority (“the Authority”) entered into two (2) swaptions with two (2) Counterparties that provided the Authority with an upfront payment of $4,552,500 from Bank of America, N.A. and $3,035,000 from Wachovia, N.A. (collectively, the “Premium”), net of issue costs of $160,000. As a synthetic refunding of its 1999 transportation system revenue bonds, the Premium represents the present value savings as of June 2005, of a refunding on November 1, 2009, without issuing refunding bonds as of June 2005. The swaptions give Bank of America, N.A. and Wachovia Bank, N.A. (collectively, the “Counterparties”) the option to enter into an interest rate swap whereby they would receive fixed amounts and pay variable amounts. If the options are exercised, the Authority would then expect to issue variable-rate refunding bonds.

44 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

8. BONDS AND NOTES PAYABLE (CONTINUED)

Terms - The Counterparties have the one-time option of exercising the agreements on July 1, 2009. If the options are exercised, the underlying swaps would be effective as of November 1, 2009 and mature on November 1, 2029. The swaps were priced at a fixed rate of 4.70% based on an amortizing notional schedule with a combined $87,795,000 initial notional amount. If the swaps are executed, the Authority would pay a fixed rate of 4.70% and receive a variable payment computed as 75 percent of the London Interbank Offered Rate (LIBOR). Furthermore, the Authority would also receive an exercise fee of $1,319,597.52 from Bank of America, N.A., and $879,731 from Wachovia Bank, N.A. simultaneously with the issuance of the related bonds, but not later than November 1, 2009. As part of the swaptions, the Authority obtained two (2) interest rate swap insurance policies, issued by CIFG Assurance North America, Inc. (the “Insurer”) for the account of the Authority, as principal, and the Counterparties, as beneficiary. The insurance policies provide for risk mitigation and limit the need for the Authority to post eligible collateral.

Fair value - As of December 30, 2006, the swaptions had a negative fair value of ($5,869,207). The fair values were estimated using the Black, Derman and Toy (BDT) option pricing model. This model takes into consideration probabilities, volatilities, time, and underlying prices.

Market access risk and interest rate risk - If the options are exercised and the refunding bonds cannot be issued, the 1999 transportation system revenue bonds will not be refunded. In this case, the Authority will either have to unwind the swaps and pay a termination payment, or the Authority will make net swap payments as required by the terms of the swap agreements. If the options are exercised and the Authority issues variable rate bonds, the actual savings ultimately recognized by the transactions will be affected by the relationship between the interest rate terms of the variable rate bonds to be issued versus the variable rate payments on the swaps (75 percent of LIBOR).

At December 31, 2006, the unamortized SWAP Premium balance was $7,041,212. During the year, $468,506, was amortized to interest income.

9. ARBITRAGE REBATE PAYABLE

The Tax Reform Act of 1986 imposed additional restrictive regulations, reporting requirements and arbitrage rebate liabilities on issuers of tax-exempt debt. This Act requires the remittance to the IRS of 90% of the cumulative rebatable arbitrage within 60 days of the end of each five-year reporting period following the issuance of governmental bonds. The estimated amount of arbitrage payable represents the excess of amounts earned on “taxable” investments over the interest cost of the tax-exempt borrowing, plus income attributable to the excess. At December 31, 2006, the Transportation System Revenue Bonds Series 2004 A had negative arbitrage. Thus, no liability exists for the Series 2004 A Bonds at December 31, 2006. The Authority’s cumulative arbitrage rebate liability related to the Transportation System Revenue Refunding Bonds Series 2003, at December 31, 2006, was $1,045,147. The increase in this obligation has been recorded in operations as a reduction of current year interest income. The arbitrage rebate liability related to the Transportation System Revenue Bonds Series 1999, at December 31, 2006 and 2005, was $184,495. 45 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

10. DEBT DEFEASANCE

In 1999, the Authority defeased a portion of certain maturities of its outstanding 1992 Series B Bonds with a portion of the proceeds of the 1999 Bonds to achieve a reduction in Debt Service. Proceeds from the 1999 Bonds were used to purchase U.S. Government Securities that were placed in an irrevocable trust fund. The investments and fixed earnings from the investments are sufficient to fully service the defeased debt until the debt is called or matures. For financial reporting purposes, the debt has been considered defeased and therefore removed as a liability from the Authority’s balance sheet. The amount of defeased debt outstanding but removed from the balance sheet was $20,670,000. The proceeds from the 1999 Bonds placed in the Trust Fund were used to refund serial bonds with interest rates ranging from 5.7% to 5.9% and a par value of $7,880,000 and term bonds with an interest rate of 6% and a par value of $12,790,000. The total par value of the refunded debt is $20,670,000, and was called on November 1, 2002 at a redemption price of 102% of the par amount, plus accrued interest to the redemption date. As a result of the defeasance, the Authority reduced its total debt service requirements by $1,368,894, which resulted in an economic gain (difference between the present value of the debt service payments on the old and new debt) of $1,024,436.

In 2003, the Authority current refunded an additional portion of certain maturities of its outstanding 1992 Series B Bonds by issuing $15,790,000 of Series 2003 Bonds to achieve a reduction in Debt Service. Proceeds from the 2003 Bonds were used to purchase U.S. Government Securities that were placed in an escrow account. The investments and fixed earnings from the investments were sufficient to fully service the defeased debt until the debt was called. For financial reporting purposes, the debt has been considered defeased and therefore, removed as a liability from the Authority’s balance sheet. The amount of defeased debt removed from the balance sheet was $15,455,000. The proceeds from the 2003 Bonds placed in the escrow account were used to refund serial bonds with interest rates ranging from 5.7% to 5.9% and a par value of $5,900,000 and term bonds with an interest rate of 6% and a par value of $9,555,000. The total par value of the refunded debt is $15,455,000 and was called on May 9, 2003 at a redemption price of 102% of the par amount, plus accrued interest to the redemption date. As a result of the defeasance, the Authority reduced its total debt service requirements by $1,333,961.39, which resulted in an economic gain (difference between the preset value of the debt service payments on the old and new debt) $1,284,158.48.

46 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

11. CONDUIT DEBT OBLIGATIONS

Conduit debt obligations are defined as certain limited-obligation revenue bonds, certificates of participation, or similar debt instruments issued by a state or local governmental entity for the express purpose of providing capital financing for a specific third party that is not part of the issuer’s financial reporting entity. The Authority has two conduit debt obligations as of December 31, 2006 as described below.

In 1997, the Authority issued $5,130,000 in Lease Revenue Bonds to provide funds to pay a portion of the cost of constructing and equipping a special fixed base operator facility at the Atlantic City International Airport to be leased and operated by Raytheon Aircraft Services, Inc. (Raytheon).

On June 29, 2006, the Authority entered into a termination agreement with Raytheon wherein Raytheon agreed to terminate all of its rights under the contract and further agreed to deposit $4,374,424.42 into an escrow account at Bank of New York. This amount was sufficient to pay the January 1, 2006 sinking fund payment, the optional call, call premium and interest.

These bonds were called and paid off in January 2007.

The Bonds were subject to redemption at the option of the Authority, upon the direction of the Lessee prior to maturity and upon notice as provided in the General Resolution, in whole or in part on January 1, 2007 or any date thereafter. If less than all the Bonds are to be redeemed on any date, the Bonds to be redeemed shall be selected by lot. Redemption prices of the Bonds shall be equal to the following percentages of principal amount to be redeemed together with unpaid interest accrued on such principal amount to the redemption date:

Redemption Period of the Bonds (both dates inclusive) Redemption Price

January 1, 2007 through December 31, 2007 102% January 1, 2008 through December 31, 2008 101% January 1, 2009 and Thereafter 100%

The total amount of this outstanding conduit debt as of December 31, 2006 was $4,135,000. The Bonds were a special limited obligation of the Authority and were payable solely from revenues derived by the Authority pursuant to a Repayment Agreement between the Authority and Raytheon Aircraft Services, Inc. The Authority had no other responsibility for the payment of this debt.

47 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

11. CONDUIT DEBT OBLIGATIONS (CONTINUED)

The Authority issued and sold Special Revenue Bonds to Mirage Resorts, Incorporated in 1999, 2000, and 2001 to provide funds to pay a portion of Mirage’s share of the cost of the Atlantic City Expressway Connector Project (“Connector”). The Special Revenue Bonds will be payable solely from amounts received by the Authority from CRDA pursuant to the Pledge Agreement, dated October 10, 1997 between the Authority and CRDA. The Authority has no other responsibility for the payment of this debt. The amounts payable by CRDA under the CRDA Pledge Agreement are Governmental Grants, which do not constitute Revenues under the Bond Resolution, and the Special Revenue Bonds are not payable from or secured by such Revenues. The total amount of this outstanding conduit debt as of December 31, 2006 is as follows:

Year Amount Accreted Value Maturity Issued Issued at 12/31/06 Value 1999 $ 20,003,710 $ 24,425,000 $ 24,425,000 2000 24,999,328 30,075,000 30,075,000 2001 9,996,322 11,390,000 11,390,000 $ 54,999,360 $ 65,890,000 $ 65,890,000

All of the Special Revenue Bonds mature on October 1, 2037 and have interest rates ranging from 3.5% to 4.05%.

.

48 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

12. RATES AND CHARGES

Section 7.08 of the Bond Resolution states as follows:

(a) (1) The Authority shall at all times fix, impose, charge and collect tolls, fares, fees and other charges for the use of the Transportation System as shall be required in order that, in each fiscal year, net revenues shall at least equal the net revenue requirements for such year; and

(2) The Authority shall at all times fix, impose, charge and collect tolls, fares, fees and other charges for the use of the Transportation System as shall be required in order that, in each fiscal year, current revenues shall at least equal the Operating Expenses for Pledged Projects for such fiscal year and the debt service on all outstanding bonds (net of capitalized interest) and subordinated indebtedness for such fiscal year and any required deposits to the Debt Service Reserve Fund and the Rehabilitation and Repair Fund, if any such deposits are required.

The net revenue requirement means an amount of net revenue for the period under consideration equal to the greater of:

120% of the debt service payable on all outstanding bonds (net of capitalized interest available for the purpose); or

100% the aggregate of debt service payable on all outstanding bonds (net of available capitalized interest as aforesaid), Rehabilitation and Repair Requirements, State Payment Requirement, debt service payable during the period on subordinated indebtedness, operating expenses of general projects, and other required deposits to funds, including the Debt Service Reserve Fund and Rebate Fund.

49 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

12. RATES AND CHARGES (CONTINUED)

Section 7.08 Section 7.08 Section 7.08 (a)(1) (a)(1) (a)(2) 120.00% 100.00% 100.00% Operating Revenue $ 83,676,217 $ 83,676,217 $ 83,676,217 Interest Revenue 429,687 429,687 429,687 Interest Revenue-Airport 76,838 76,838 76,838 Interest Revenue Transferred from Restricted Funds 634,087 634,087 634,087 Interest Revenue-General Reserve Fund 509,122 509,122 509,122 Total Revenue 85,325,951 85,325,951 85,325,951 Less: Grant Revenue 3,928,337 3,928,337 3,928,337 Airport Revenue 7,277,153 7,277,153 7,277,153 Airport Interest 76,838 76,838 76,838 Total Available Revenue 74,043,623 74,043,623 74,043,623

Pledged Project Expenses 44,885,545 44,885,545 44,885,545

Net Revenues $ 29,158,078 $ 29,158,078 $ 29,158,078

Senior Debt Service $ 16,775,043 $ 16,775,043 $ 16,775,043 Rehabilitation & Repair Requirement State Payment Requirement 2,500,000 Other Required Deposits General Project Operating Expenses 2,804,985

Total Debt Service & Other Obligations $ 16,775,043 $ 22,080,028 N/A

Total Pledged Projects and Debt Service N/A N/A $ 61,660,588

Coverage Ratio 173.82% 132.06% 120.08% Required Coverage 120.00% 100.00% 100.00% Excess Coverage $ 53.82% $ 32.06% 20.08%

50 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

13. PENSION PLAN

All full-time Authority employees participate in the Public Employees' Retirement System ("PERS") and the Police and Firemen’s Retirement System (“PFRS”). The Division of Pensions and Benefits ("Division") within the Treasury Department of the State of New Jersey is the administrator of the funds and charges the employee and employer annually for their respective contributions. The Plans provide retirement and disability benefits, annual cost of living adjustments, and death benefits to plan members and beneficiaries.

The Division of Pensions and Benefits issues publicly available financial reports that include the financial reports for each of the Plans that include financial statement and required supplementary information. The financial reports may be obtained by writing to the State of New Jersey, Department of Treasury, Division of Pensions, P.O. Box 295, Trenton, New Jersey, 08625-0295.

Covered employees are required by State statute to contribute a certain percentage of their salary to the plans. PERS and PFRS bill the Authority annually at an actuarially determined rate for its required contribution. The current rate is 5% for PERS and 8.5% for PFRS of annual covered payroll.

The contribution requirements of Plan members and the Authority are established and may be amended by the Board of Trustees of the respective Plans. The employees’ contribution to the PERS and PFRS Plans for the year ended December 31, 2006 was $ 904,335 and $70,547 respectively. The Authority’s contribution to the PERS and PFRS Plans for the year ended December 31, 2006 was $401,893 and $85,060 respectively.

14. RISK MANAGEMENT

The Authority is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; error and omission, injury to employees, professional liability, airport liability, environmental and natural disasters. The Authority purchased commercial insurance to manage all of these risks except for workers compensation, general liability and auto. Settled claims have not exceeded this coverage in any of the past three years.

Self-Insurance

Effective September 1, 2005, the Authority established a Self-Insurance fund program for certain risk areas. The Authority’s per occurrence self insurance retention levels are $350,000 for worker’s compensation, $200,000 for auto liability, and $200,000 for general liability. Based on estimates provided by an independent actuary, the Authority has recorded accrued expenses of $830,000, which represents estimated claims relating to the period ended December 31, 2006. The Reserve for Insurance Claims balance at December 31, 2006 is $883,018. During the year, claim expense in the amount of $93,564 was charged to the reserve. The Authority has an umbrella excess liability policy over those self-insurance retention levels of $15,000,000 per occurrence and $30,000,000 annual aggregate.

51 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

15. AUTHORITY RETIREMENT MEDICAL BENEFITS

In accordance with the Authority’s Personnel Policies Manual adopted by the Board in January 1993 (Resolution 1993-02), the Authority offers certain health-care benefits to its retired employees. All employees of the Authority are eligible if, at retirement, they have at least 20 years of full-time service with the Authority and are qualified to immediately receive pension payments from PERS; or if they have 25 years or more service credited in PERS and are immediately eligible to receive pension benefits. The Authority funds the benefits on a pay-as- you-go basis. The cost of providing these benefits for eighty-three (83) retirees for the year ended December 31, 2006 was $1,353,826.

16. COMPENSATED ABSENCES

A. Non-Union Employees

Full-time, non-union employees are entitled to fifteen paid sick leave days each year. Unused sick leave may be accumulated and carried forward to the subsequent year. The Authority compensates employees for unused sick leave upon retirement or upon resignation if the employee vests in the pension system until retirement age has been reached. The current policy entitles an employee to receive a maximum payout of $17,500 that is paid at the employee’s rate of pay at retirement. A full year’s vacation entitlement may be carried to the next calendar year. Any carried-over vacation time must be taken during the subsequent year or it is lost.

Part-time employees are entitled to a proportionate amount of compensated absences based on hours worked.

Compensatory time for full-time employees cannot accrue beyond eighty hours and must be taken within twelve months of being earned. The use of compensatory time must be approved by a Department Director. The Authority may, at its discretion, purchase back compensatory time at the employee’s rate of pay when the compensatory time was earned.

52 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

16. COMPENSATED ABSENCES (CONTINUED)

B. Union Employees

In accordance with the union contracts in effect in 2004, members of the International Federation of Professional and Technical Engineers, Local 196, Chapter 2 and Local 193, Chapter A, ten vacation days may be carried to the next calendar year for Local 196 and Local 193. Any carried-over vacation time must be taken during the subsequent year or it is lost. In addition, members are entitled to accumulate sick time up to $17,500. The following percentages apply:

(a) For employees who resign in good standing, or retire, but do not receive pension payments under PERS:

(i) 50% of present salary for the first 150 days of accumulated sick days up to a maximum of $17,500; (ii) 100% of present salary for accumulated sick leave in excess of 150 days.

(b) For employees who retire and are immediately eligible to receive payments under PERS:

(i) 75% of present salary for the first 150 days of accumulated sick days up to a maximum of $17,500; (ii) 100% of present salary for accumulated sick leave in excess of 150 days.

On August 1, 1996, a compensatory time policy was put in place for members of Local 196, Chapter 2. Under this policy, compensatory time can be accrued up to a maximum of forty hours per contract year but can re-accumulate up to forty hours as the time is used.

Under the contract for Local 193, Chapter A, compensatory time cannot accrue beyond sixty hours and must be taken within twelve months of being earned.

Members of the Atlantic City International Airport Fire Fighters, Local S-18 of the International Association of Fire Fighters, AFL-CIO, CLC may carry up to one year’s vacation allotment. Any carried over vacation time must be taken during the subsequent year or it is lost. In addition, members are entitled to accumulate sick leave up to $17,500 at the employee’s rate of pay at retirement. Unused sick time earned will not be paid upon resignation, termination or layoff.

Compensatory time must be taken within 12 months of being earned.

53 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

16. COMPENSATED ABSENCES (CONTINUED)

C. Accrued Expense

The Authority has both operating and non-operating accrued expenses. The operating accrued expense pertains to compensated absences as described below. The Authority’s accrued liability for compensated absences including additional amounts accrued for Social Security, Medicare and pension plan contributions as of December 31, 2006 is as follows:

Amount

Sick Time $ 605,254 Vacation Time 460,267 Compensatory Time 108,945 $ 1,174,466

17. SOUTH JERSEY TRANSPORTATION PLANNING ORGANIZATION

The South Jersey Transportation Planning Organization (“SJTPO”) is a metropolitan planning organization whose function is to develop transportation programs for urbanized areas of the State in order to encourage and promote the development of intermodel transportation systems that maximize mobility and minimize air pollution. The New Jersey Department of Transportation Grant for Administration Staff Support for the SJTPO is designed to reimburse the Authority for its expenses incurred each year for the SJTPO. These expenses typically include salaries, fringe benefits and non-salary direct expenses.

18. AIRPORT MANAGEMENT

Pursuant to N.J.S.A. 27:25A-24, the Authority established a transportation project known as the Atlantic City International Airport (“ACY”). Effective April 1, 1996, pursuant to Authority Resolution #1996-06, the Authority entered into an operating and maintenance agreement with Johnson Controls World Services (“JCWS”) for operations, maintenance and support service at ACY. Under this arrangement, the Authority is entitled to receive all of the revenue and must pay all the expenses associated with the operation of ACY terminal operations. JCWS was sold to American Port Services (“AvPorts”) during 1997. AvPorts assumed all rights and obligations of the existing contract between the Authority and JCWS. Since April 1, 2001, the Authority and AvPorts have been operating under a five-year extension of the operating and maintenance agreement, which was provided for in the original contract. This extension expired March 31, 2006, however, the Authority continues to use the services of AvPorts on a month to month basis. During 2002, AvPorts was acquired by MacQuarrie Aviation North America 2 (MAVNA).

54 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

18. AIRPORT MANAGEMENT (CONTINUED)

Effective April 15, 1998, the Authority assumed control of the runways and taxiways at ACY pursuant to Resolution 1998-14. The Authority executed a lease and cooperative agreement with the William J. Hughes Technical Center for certain lands, facilities and equipment for the Atlantic City International Airport. The execution of this agreement requires the Authority to maintain the airfield at ACY, but it also allows for the collection of landing fees.

Pursuant to the Act, the Authority has the power to set rates and charges at ACY. The Authority has adopted a compensatory rates and charges methodology. Rates and charges are subject to review and adjustment every two years. Currently, the Authority is operating under the Rates and Charges Resolution adopted June 25, 2002.

19. STATE PAYMENT

Pursuant to an agreement dated November 17, 1983 between the Authority (as successor to the NJEA) and the State Department of Transportation, the Authority has agreed to make annual payments to the State of New Jersey in the sum of $2,500,000.

20. ELECTRONIC TOLL COLLECTION

In May 1995, the Authority entered into an agreement with MFS Network Technologies, Inc. for the design and implementation of an Electronic Toll Collection and Traffic Management System (the “ACE ETTM System”). The system became operational for certain buses in July 1997.

In December, 1996, the Authority, along with the New Jersey Turnpike Authority (the “Turnpike Authority”), the New Jersey Highway Authority (the “Highway Authority”), The Port Authority of New York and New Jersey, and the State of Delaware, Acting By and Through Its Department of Transportation (each a “Participating Agency” and, collectively, the “Participating Agencies”) established a Consortium (the “Consortium”) for the purpose of implementing an E-ZPass“ electronic toll collection system (the “Electronic Toll Collection System” or the “ETC System”) for the toll roadways operated by the Participating Agencies. In March, 1998, the Turnpike Authority, as lead agency for the Consortium, entered into a contract with MFS Network Technologies, Inc. (the “ETC Project Agreement”), pursuant to which MFS Network Technologies, Inc. (“MFS”) and its successors provided services to the Consortium in connection with: (i) the design, installation and implementation of the ETC System, (ii) the design, installation, marketing, operation and maintenance of a fiber optic system along the toll roads operated by the Participating Agencies, and (iii) the design, installation, implementation, maintenance and operation of a customer service center and violations processing center for the ETC System and the ACE ETTM System, all as more fully described in the ETC Project Agreement (collectively, the “ETC Project”). Subsequent to the execution of the ETC Project Agreement, Worldcom, Inc. (“Worldcom”) became the eventual successor in interest to all of the rights, duties and obligations of MFS under the ETC Project Agreement.

55 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

20. ELECTRONIC TOLL COLLECTION (CONTINUED)

The Authority’s participation in this Consortium resulted from its desire to provide E-ZPass“ as a method of payment to its patrons. Consequently, the Authority’s participation in the Consortium was limited to the implementation and operation of the Customer Service Center/Violations Processing Center (the “CSC/VPC”) and the fiber optic system portions of the ETC Project. E-ZPass“ became available as method of payment on the Expressway on November 11, 1998 in connection with the opening of the Consortium Customer Service Center. In July 2002, the Turnpike Authority, acting as lead agency for the Consortium, gave notice to Worldcom of the early termination of the ETC Project Agreement by the Consortium in accordance with the terms of the ETC Project Agreement. Subsequently, the Authority, the Turnpike Authority and the Highway Authority (collectively, the “NJ Agencies”) entered into a Professional Services Agreement, effective as of August 2, 2002 (the “ACS Agreement”), with ACS State & Local Solutions, Inc. (“ACS”) pursuant to which ACS agreed to provide certain remediation services for the ETC System for the Turnpike and Highway Authorities and to operate and maintain the ETC System for the Turnpike and Highway Authorities, as well as to operate and maintain the customer service center and the violations processing center, for the toll roadways operated by the NJ Agencies until July 31, 2012, unless the ACS Agreement is earlier terminated in accordance with its terms.

Payments that the Authority may be required to make under the ACS Agreement and prior agreements relating to the E-ZPass“ project constitute Pledged Project Operating Expenses payable from Revenues prior to Debt Service on the Bonds.

ACS began operating and maintaining the E-ZPass“ CSC and VPC for the toll roads operated by the NJ Agencies on or about March 25, 2003 and because the Authority participates in the CSC/VPC portion of the contract only; pursuant to the ACS Agreement, ACS shall invoice the Authority on a monthly basis for 3.6% of all amounts due with regard to those services (the “CSC Services”) pertaining to establishment, operation and maintenance of the Customer Service Center (the “CSC”), including the portion of the CSC to be used for the processing of toll collection violations (the “VPC”). Payments to be made by the Authority under the ACS Agreement constitute Operating Expenses of the Expressway Project.

21. INTERFUNDS AND AIRPORT SUBSIDY

The total interfund payable from the Airport Fund to the Expressway Fund at December 31, 2006 is $18,337,237, which consists of $13,347,097 payable from unrestricted funds and $4,990,140 payable from restricted funds.

Pursuant to the second amended and restated resolution authorizing bonds and other obligations, Section 5.02(I) establishes an Airport Fund.

56 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

21. INTERFUNDS AND AIRPORT SUBSIDY (CONTINUED)

Accordingly, the Airport Fund is maintained separately from the Expressway Fund and the financial results are separately presented in the accompanying Proprietary Fund Financial Statements. Any excess direct operating expense incurred over revenue earned at the Airport is subsidized by the Expressway Fund and is a liability of the Airport Fund to the Expressway Fund. The Authority periodically transfers amounts from the Expressway Fund to the Airport Fund to subsidize Airport operations. When such transfers are made, the Authority establishes a loan receivable from the Airport Fund to the Expressway Fund for the amount transferred. The loan is payable to the Expressway Fund from unrestricted funds of the Airport Fund when the monies are used on Airport operating expenses, and the loan is payable from restricted funds of the Airport Fund when the monies are used on Airport capital expenditures. These loans are payable to the Expressway Fund when Airport revenue exceeds Airport direct operating expense in any given year, but in no event later than ten years from the date of the loan. Any amounts not repaid by the end of the term due will be written off at the end of the ten- year period.

22. CRDA PARKING FEE AGREEMENT

On October 10, 1997, in connection with the Atlantic City Expressway Connector Project, the Authority entered into a Parking Fee Agreement with the Casino Reinvestment Development Authority (“CRDA”).

Pursuant to the Agreement, a portion of certain statutory parking fees (“Marina Parking Fees”) receivable by CRDA from marina parking facilities used in conjunction with any new licensed casino hotel construction and located on land in the Marina District (also commonly known as the H-Tract) will be payable to the Authority. These parking fees pertain to the minimum charge per day for each motor vehicle parked, garaged or stored in a parking space in the parking facility, other than for motor vehicles owned or leased by the owner or operator of such facility or by an employee of the casino hotel which owns or leases such facility. The maximum amount payable by CRDA under the Parking Fee Agreement is an amount sufficient to amortize $65 million in Authority bonds issued to finance the Atlantic City Expressway Connector Project and certain allocated costs of issuance. CRDA’s payment obligations under the Parking Fee Agreement, as amended by the First, Second and Third Amendments dated June 15, September 20, 2001, and March 2005 respectively are subordinate to the prior lien on the Marina Parking Fees of certain parking revenue bonds of CRDA, plus liens associated with two additional issuances CRDA parking revenue bonds. During 2006, the Authority recognized $2,846,946 versus $3,653,383 in 2005. Because of the subordination provisions described above, there are no assurances that the amount of Marina Parking Fees available to enable CRDA to repay the Authority will be sufficient for such purposes. As a result of the third amendment to the parking fee agreement the Authority was able to accelerate release of some of the fees in 2005. The decrease in revenue in 2006 is due to sixteen months worth of parking fees being recognized in 2005 verses a full twelve months worth of revenue being recognized in 2006.

57 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

23. TRANSPORTATION SERVICES

Effective January 1, 2004, the Authority acquired and assumed the operation of the “Comprehensive Transportation System” in Camden and Gloucester Counties, previously operated by the Camden County Improvement Authority. The Comprehensive Transportation System includes (i) the transportation needs of the Work Force New Jersey and Temporary Assistance To Needy Families (‘TANF”) recipients, post-TANF recipients, welfare clients, low income individuals, and other transit dependents, (ii) the operation of a Job Access/Reverse Commute Program in Camden County, (iii) a partnership with New Jersey Transit to provide local shuttle motor bus passenger service in and around Camden County, and (iv) transportation services for residents of Gloucester County to and from the Pureland Industrial Park from Westville and Woodbury, Gloucester County. Funding from the various state grants above are used to fund operating costs. Operating expenses incurred are offset by operating revenues from each respective grantor agency, as well as revenue from local private employers. Services continued to be provided between the Authority and the Home Port Alliance, to provide transportation to the Battleship New Jersey. The Authority also continued to provide shuttle services at the airport for passenger’s convenience to and from the surface parking lots, as well as transportation services for Camden County Veterans in and around Camden and Gloucester Counties, During 2006, an agreement was made with Richard Stockton State College to provide for shuttle bus services to the College.

24. RELATED PARTY

As of June 30, 2005, a board member was appointed to the Authority Board of Commissioners. This individual is the brother of one of the partners in a law firm that provided representation and received compensation from the Authority during 2006. During 2006, this firm billed the Authority $233,578 for services rendered. At December 31, 2006, $60,024 was payable and due to the firm. As of the date of this report, all outstanding amounts for the year ending December 31, 2006 have been paid. This commissioner does not direct legal work to any law firms on behalf of the Authority and additionally, abstains from voting when legal invoices are presented to the Board of Commissioners for approval.

25. OPERATING LEASES

The Authority currently has a lease agreement with a private company to provide office space for the SJTPO office in Vineland, New Jersey. This lease expires in 2010. The Authority also has a lease agreement with another private company to provide for office space for the Transportation Services division located in Camden, New Jersey. This lease expires in 2009. The Authority has an option to renew this lease for three (3) consecutive terms of one (1) year each beyond the end of the initial term. Lease expenses incurred for 2006 and 2005 were $127,481 and $136,697, respectively.

58 SOUTH JERSEY TRANSPORTATION AUTHORITY

NOTES TO FINANCIAL STATEMENTS

Year Ended December 31, 2006

26. LEGAL SETTLEMENT

On November 13, 2003, Trump Hotels and Casino Resorts, Inc. (“Trump Hotels”) filed an action in the Superior Court of New Jersey, Atlantic County, Law Division against the Authority. Trump Hotels has alleged in the action that the Authority breached an agreement entered into between Trump Hotels and the Authority on or about June 28, 2002 (the “Trump Agreement”). Trump Hotels alleged that the Authority failed to complete the road project known as “Huron Avenue U- Turn” in the time provided in the Trump Agreement. Trump Hotels alleged that pursuant to the Trump Agreement, the Authority was required to complete the aforementioned project on or before June 30, 2003, or, alternatively, prior to the opening of the first facility in the Huron North Redevelopment Area, subject to any unforeseen construction delays that may be experienced by the Authority. The project was not completed, and thereby open for use, until October 23, 2003, due to the unforeseen occurrence of prolonged settlement related to the two-stage surcharges, and unforeseen weather conditions. Trump Hotels had sought damages, alleging that the failure to complete the said road project caused a loss of slot revenues at Trump Hotels marina casino for the 115 days that the project was delayed in opening. Trump Hotels did not allege the loss of any other revenues. The Authority and Trump Hotels amicably resolved the claims made in the suit by and through a settlement approved by the Authority’s Commissioners at the July 20, 2006 regular meeting in the amount of $1,750,000 to be paid in two (2) payments, with one payment being made in 2006, and the second payment to be made in 2007, and is appropriately reported as an accounts payable in the amount of $750,000 at December 31, 2006. The charges totaling $1,750,000 have been reported in the financial statements as a non-operating expense (“Claims”) in the Construction Fund.

27. VOLUNTARY SEPARATION PLAN

On October 17, 2006, the Commissioners approved the Voluntary Separation Plan (“Plan”). The purpose of the Plan is to provide separation pay to certain Authority employees who voluntarily elect to terminate employment. This plan was open to any employee who had at least fifteen (15) years of Authority, Public Employees Retirement System (“PERS”) or Police and Fireman’s Retirement System (“PFRS”) service, as of December 31, 2006. In addition, the plan is separate and distinct from any other benefits for which Participants may be eligible, such as retirement payment under the Public Employment Retirement System. Any Participant’s separation payment was equal to one-half year of their Base Pay. During 2006, eleven (11) Participants elected to receive the one-time early separation payments totaling $365,997. The total amount was included in year end accounts payable.

59 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF NET ASSETS

FUND FINANCIAL STATEMENTS

December 31, 2006

With Comparative Totals as of December 31, 2005

Unrestricted Accounts Restricted Accounts Revenue Airport General Debt Service Rehabilitation State Payment Debt Service Rebate Subordinated Construction Consolidation Totals Fund Fund Reserve Fund Fund and Repair Fund Fund Reserve Fund Fund Debt Fund Fund Eliminations 2006 2005 ASSETS Unrestricted Assets Cash and Cash Equivalents $ 8,363,892 $ 1,980,130 $ 9,304,634 $ $ $ $ $ $ $ $ $ 19,648,657 $ 13,625,386 Investments 3,963,816 3,963,816 2,000,000 Change Funds 39,790 39,790 35,891 Interest Receivable 27,651 9,215 96,366 133,231 51,622 Accounts Receivable, net of allowance for uncollected accounts of $83,728 2,152,713 696,833 2,849,547 3,791,789 Grants Receivable 1,707,924 - 1,707,924 1,450,331 Prepaid Expenses 1,539,441 384,140 1,923,581 1,709,176 Fuel Inventory 113,885 113,885 72,263 Interfunds Receivable 7,551,844 100,115 18,609,370 (26,261,329) - -

Total Unrestricted Assets 21,497,139 3,170,434 31,974,187 - (26,261,329) 30,380,431 22,736,458

Restricted Assets Cash and Cash Equivalents 1,895,997 2,372,197 12 119,560 56 912 27,188,060 31,576,794 20,105,481 Investments 2,340,172 3,768,140 18,382,383 178,836 32,642,190 57,311,722 36,077,202 Accounts Receivable - - - Grants Receivable 1,437,092 1,437,092 769,759 Interfunds Receivable 8,590,000 1,608,036 208,334 1,196,153 - 9,623,098 (21,225,622) - - Interest Receivable 6,668 58,507 75 163,037 234 253,297 481,818 463,577

Total Restricted Assets 12,832,837 7,806,880 208,421 18,664,981 1,375,279 912 71,143,737 (21,225,622) 90,807,426 57,416,019

Noncurrent Assets Capital assets: Non-Infrastructure Capital Assets: Land and Improvements - 147,321,510 147,321,510 147,321,510 Electronic Toll Equipment - 8,917,935 8,917,935 8,917,935 Buildings and Equipment - 62,307,942 62,307,942 60,544,752 Less Accumulated Depreciation - (38,310,789) (38,310,789) (33,866,675) Total Non-Infrastructure Capital Assets ------180,236,598 - 180,236,598 182,917,522 Infrastructure Capital Assets: Infrastructure - Equipment - 9,617,363 9,617,363 9,267,040 Infrastructure - 391,890,085 391,890,085 388,656,537 Less Accumulated Depreciation - (79,165,687) (79,165,687) (65,294,114) Total Infrastructure Capital Assets ------322,341,761 - 322,341,761 332,629,463

Construction in Progress 8,875,270 8,875,270 -

Total Capital Assets ------511,453,629 - 511,453,629 515,546,985

Bond Issuance Costs 9,446,844 9,446,844 7,722,445 Less Accumulated Amortization (2,320,400) (2,320,400) (1,921,237) Total Non-current Non-capital Assets ------7,126,444 - 7,126,444 5,801,208

Total Non-Current Assets ------518,580,074 - 518,580,075 521,348,193

TOTAL ASSETS $ 21,497,139 $ 3,170,434 $ 31,974,187 $ 12,832,837 $ 7,806,880 $ 208,421 $ 18,664,981 $ 1,375,279 $ 912 $ 589,723,811 $ (47,486,951) $ 639,767,930 $ 601,500,670

60 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF NET ASSETS

FUND FINANCIAL STATEMENTS

December 31, 2006

With Comparative Totals as of December 31, 2005

Unrestricted Accounts Restricted Accounts Revenue Airport General Debt Service Rehabilitation State Payment Debt Service Rebate Subordinated Construction Consolidation Totals Fund Fund Reserve Fund Fund and Repair Fund Fund Reserve Fund Fund Debt Fund Fund Eliminations 2006 2005 LIABILITIES AND NET ASSETS Current Liabilities Payable From Unrestricted Assets: Accounts Payable $ 3,712,218 $ 923,332 $ $ $ $ $ $ $ $ $ 4,635,550 $ 3,755,752 Deferred Income 323,548 92,458 416,006 407,981 Escrow Deposits 69,996 47,947 117,943 115,168 Accrued Expenses 1,174,466 2,533 1,176,999 986,316 Reserve for Self Insurance 883,018 883,018 - Interfunds Payable 4,262,713 13,347,097 - (17,609,810) - -

Total Current Liabilities Payable From Unrestricted Assets 10,425,959 14,410,835 ------2,533.00 (17,609,810) 7,229,516 5,265,217

Current Liabilities Payable From Restricted Assets: Accrued Interest 2,239,176 - 2,239,176 2,135,349 Accounts Payable 74 3,154,728 3,154,802 1,959,656 Unamortized SWAP Premium 7,041,212 7,041,212 7,509,719.00 Retainages Payable 650,518 650,518 692,031 Due to Other Government Agencies - 208,334 - 208,334 208,334 PFC Advanced 3,457,761 3,457,761 1,415,357 Economic Recovery Funds Advanced 695,932 695,932 848,615 Elevated U-Turn Payable 121,411 121,411 121,411 Interfunds Payable 9,589,296 1,554,613 - 0 838 18,732,393 (29,877,141) - - Bonds and Notes Payable Net of Discount, Premium and and Loss on Defeasance ($52,084) 5,335,832 5,335,832 15,597,775

Total Current Liabilities Payable From Restricted Assets - - - 11,828,472 1,554,613 208,334 0 - 912 39,189,788 (29,877,141) 22,904,978 30,488,247

Noncurrent Liabilities: Arbitrage Rebate Payable 1,229,642 1,229,642 184,495 Bonds and Notes Payable Net of Discount, Premium and Loss on Defeasance ($2,139,458) 268,347,626 - 268,347,626 224,338,654

Total Noncurrent Liabilities ------1,229,642 - 268,347,626 - 269,577,268 224,523,149

TOTAL LIABILITIES $ 10,425,959 $ 14,410,835 $ - $ 11,828,472 $ 1,554,613 $ 208,334 $ 0 $ 1,229,642 $ 912 $ 307,539,947 $ (47,486,951) $ 299,711,762 $ 260,276,613

61 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF NET ASSETS

FUND FINANCIAL STATEMENTS

December 31, 2006

With Comparative Totals as of December 31, 2005

Unrestricted Accounts Restricted Accounts Revenue Airport General Debt Service Rehabilitation State Payment Debt Service Rebate Subordinated Construction Consolidation Totals Fund Fund Reserve Fund Fund and Repair Fund Fund Reserve Fund Fund Debt Fund Fund Eliminations 2006 2005 NET ASSETS

Invested in Capital Assets, Net of Related Debt $$ $ $ $ $ $ $$$237,826,511 $$237,826,511 $ 272,891,217

Restricted for: Debt Service 1,004,365 1,004,365 8,171,436 Rehabilitation and Repair 6,252,267 6,252,267 6,078,242 Debt Service Reserve 18,664,981 18,664,981 16,193,220 State Payment 87 87 137 Capital Projects 44,357,352 44,357,352 11,603,777

Unrestricted 11,071,181 (11,240,401) 31,974,187 145,637 - - 31,950,605 26,286,028

Total Net Assets 11,071,181 (11,240,401) 31,974,187 1,004,365 6,252,267 87 18,664,981 145,637 - 282,183,863 - 340,056,168 341,224,057

TOTAL LIABILITIES AND NET ASSETS $ 21,497,140 $ 3,170,434 $ 31,974,187 $ 12,832,837 $ 7,806,880 $ 208,421 $ 18,664,981 $ 1,375,279 $ 912 $ 589,723,810 $ (47,486,951) $ 639,767,930 $ 601,500,670

62 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FUND FINANCIAL STATEMENTS

Twelve Months Ended December 31, 2006

With Comparative Totals for the Year Ended December 31, 2005

Unrestricted Accounts Restricted Accounts Totals Revenue Airport General Reserve Rebate Subordinated Debt Service Rehabilitation State Payment Debt Service Construction Consolidation Fund Fund Fund Fund Debt Fund Fund and Repair Fund Fund Reserve Fund Fund Eliminations 2006 2005 Operating Revenues: Tolls $ 59,477,706 $ $ $ $ $ $ $ $ $ $ $ 59,477,706 $ 57,970,661 Concessions 2,046,941 2,046,941 1,962,861 ETC Administration Revenue 1,492,252 1,492,252 1,624,406 Garage Parking 1,291,189 1,291,189 956,416 Marina Parking Revenue 2,846,946 2,846,946 3,653,383 Intercept Parking 351,312 351,312 500,929 Bus Permits 344,260 344,260 367,546 Rentals 3,789,944 3,789,944 3,652,537 Emergency Service Patrol 0 0 180,000 Regional Marketing Program - - Directional Signage Program 32,599 32,599.00 Grants - - SJTPO Programs 1,832,591 1,832,591 2,178,896 Transportation Services 2,095,746 2,095,746 1,988,525.00 Other 797,578 - 797,578 613,503 Airport - 7,277,153 7,277,153 6,357,747

Total Operating Revenues 76,399,064 7,277,153 ------83,676,217 82,007,410

Operating Expenses: Executive 2,188,853 2,188,853 2,772,646 Policy and Planning 466,911 466,911 319,354 Engineering 3,209,405 3,209,405 2,945,965 Finance 1,162,221 1,162,221 1,129,904 Central Accounts 11,469,619 11,469,619 9,920,175 Marketing and Communications 974,636 974,636 606,357 Tourist Services 6,385,610 6,385,610 6,007,686 Maintenance 5,830,824 5,830,824 5,965,699 Police 6,974,056 6,974,056 5,966,440 Emergency Service Patrol 790,981 790,981 715,092 Electronic Toll Collection Expense 3,172,243 3,172,243 3,495,733 Parking-(Non Airport) 966,052 966,052 834,447 Information and Toll Technology 1,745,344 1,745,344 1,459,671 SJTPO Programs 1,832,591 1,832,591 2,178,896 Transportation Services 2,361,480 2,361,480 2,119,024 Airport - 9,332,594 9,332,594 8,603,063 Depreciation - 18,211,791 18,211,791 17,459,628

Total Operating Expenses 49,563,426 9,332,594 ------18,211,791 - 77,107,810 72,499,780

Operating Income (Loss) 26,835,638 (2,055,441) ------(18,211,791) - 6,568,406 9,507,629

63 SOUTH JERSEY TRANSPORTATION AUTHORITY

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FUND FINANCIAL STATEMENTS

Twelve Months Ended December 31, 2006

With Comparative Totals for the Year Ended December 31, 2005

Unrestricted Accounts Restricted Accounts Totals Revenue Airport General Reserve Rebate Subordinated Debt Service Rehabilitation State Payment Debt Service Construction Consolidation Fund Fund Fund Fund Debt Fund Fund and Repair Fund Fund Reserve Fund Fund Eliminations 2006 2005 Non-Operating Income(Expenses) Interest Revenue $ 429,687 $ 76,838 $ 509,122 $ 8,842 $ $ 251,378 $ 295,209 $ 3,847 $ 997,661 $ 2,132,005 $ $ 4,704,589 $ 2,914,248 Gain on Sale of Assets - - - 50,507 Other Revenue 1,890 1,890 - Air Service Grant Revenue - - - Air Service Development Expense - - - Claims (1,750,000) (1,750,000) - Fund Expenses - - - (1,000) (1,000) (199,643) Amortization Expense (407,023) (407,023) (371,172) Amortization of Bond Premium 90,637 90,637 101,799 Interest on Bonds (13,567,553) (178,821) (13,746,374) (11,986,825) State Payment (2,500,000) (2,500,000) (2,500,000)

Total of Non-Operating 429,687 76,838 509,122 8,842 - (13,316,175) 295,209 (2,496,153) 997,661 (112,312) - (13,607,281) (11,991,086) Income/(Expenses)

Income (Loss) before Contributions and Transfers 27,265,325 (1,978,603) 509,122 8,842 - (13,316,175) 295,209 (2,496,153) 997,661 (18,324,103) - (7,038,876) (2,483,457)

Capital Contributions - Grants 5,668,177 (5,668,177) - Capital Contributions - Other Sources 202,819 (202,819) - Total Capital Contributions 5,870,996 5,870,996 9,736,593 Interest Revenue Transferred From Restricted Funds 634,087 (2,118) (631,969) - Interest Revenue Transferred To Operating Account (215,077) (121,184) (3,905) (818,373) - 631,969 (526,569) (325,672) Bonds Principal Payment Transfer (15,650,000) 15,650,000 - Transfers (To)/From Unrestricted Funds (10,864,527) 34,061 10,898,588 - 22,014,181 - 2,500,008 2,292,472 10,144,097 (37,018,880) - Transfers (To)/From Restricted Funds (16,910,269) (3,932,048) - (15,650,000) 37,018,880 526,563 325,670

Change in Net Assets 124,616 (1,944,542) 7,475,662 8,842 - (7,167,071) 174,025 (50) 2,471,761 (2,311,128) - (1,167,888) 7,253,134

Total Net Assets -- Beginning 10,946,564 (9,295,858) 24,498,525 136,795 8,171,436 6,078,242 137 16,193,220 284,494,995 341,224,056 333,970,922

Total Net Assets -- Ending $ 11,071,180 $ (11,240,400) $ 31,974,187 $ 145,637 $ - $ 1,004,365 $ 6,252,267 $ 87 $ 18,664,981 $ 282,183,867 $ - $ 340,056,168 $ 341,224,056

64 SOUTH JERSEY TRANSPORTATION AUTHORITY

SCHEDULE OF BONDS, NOTES AND OTHER DEBT

Year Ended December 31, 2006

Balance Balance Date of Amount Interest Maturity December 31, December 31, Issue Issued Rate Date 2005 Issued Paid 2006

Subordinated Notes, Series 2005 3/30/2005 $ 10,440,000 3.10% 3/26/06 $ 10,400,000 $ $ 10,400,000 $ - (Tax Exempt) Original Issue Amount $10,400,000

Transportation System Revenue Bonds, 4/15/2003 15,790,000 3.00% 11/01/06 1,765,000 1,765,000 - 2003 Series 2.25% 11/01/07 1,810,000 - 1,810,000 (Tax Exempt) 3.00% 11/01/08 1,855,000 - 1,855,000 Original Issue Amount $44,100,000 4.00% 11/01/09 1,910,000 - 1,910,000 3.25% 11/01/10 1,985,000 - 1,985,000 5.00% 11/01/11 2,050,000 - 2,050,000 5.25% 11/01/12 2,155,000 - 2,155,000

13,530,000 - 1,765,000 11,765,000

Transportation System Revenue Bonds, 06/02/99 204,520,000 4.250% 11/01/06 3,065,000 3,065,000 - 1999 Series 5.000% 11/01/07 3,200,000 3,200,000 (Tax Exempt) 5.000% 11/01/08 3,360,000 3,360,000 Original Issue Amount $204,520,000 4.500% 11/01/09 3,530,000 3,530,000 5.250% 11/01/10 3,685,000 3,685,000 5.250% 11/01/11 3,880,000 3,880,000 5.250% 11/01/12 4,080,000 4,080,000 5.250% 11/01/13 6,565,000 6,565,000 5.250% 11/01/14 6,910,000 6,910,000 5.000% 11/01/15 7,275,000 7,275,000 5.000% 11/01/16 7,635,000 7,635,000 5.000% 11/01/17 8,020,000 8,020,000 5.000% 11/01/18 8,420,000 8,420,000 5.000% 11/01/19 8,840,000 8,840,000 5.125% 11/01/20 9,280,000 9,280,000 5.125% 11/01/21 9,755,000 9,755,000 5.125% 11/01/22 10,255,000 10,255,000 5.000% 11/01/23 10,785,000 10,785,000 5.000% 11/01/24 11,320,000 11,320,000 5.000% 11/01/25 11,890,000 11,890,000 5.000% 11/01/26 12,485,000 12,485,000 5.000% 11/01/27 13,105,000 13,105,000 5.000% 11/01/28 13,760,000 13,760,000 5.000% 11/01/29 14,450,000 14,450,000

204,520,000 195,550,000 3,065,000 192,485,000

65 SOUTH JERSEY TRANSPORTATION AUTHORITY

SCHEDULE OF BONDS, NOTES AND OTHER DEBT

Year Ended December 31, 2006

Balance Balance Date of Amount Interest Maturity December 31, December 31, Issue Issued Rate Date 2005 Issued Paid 2006

Transportation System Revenue Bonds, 06/24/2004 $ 22,235,000 2.250% 11/01/06 $ 420,000 $ $ 420,000 $ - 2004 Series A 3.000% 11/01/07 430,000 430,000 (Tax Exempt) 3.500% 11/01/08 440,000 440,000 Original Issue Amount $22,235,000 3.750% 11/01/09 455,000 455,000 3.875% 11/01/10 475,000 475,000 4.000% 11/01/11 490,000 490,000 4.125% 11/01/12 510,000 510,000 4.250% 11/01/13 530,000 530,000 4.250% 11/01/14 555,000 555,000 4.125% 11/01/15 580,000 580,000 4.250% 11/01/16 600,000 600,000 5.000% 11/01/17 625,000 625,000 5.000% 11/01/18 660,000 660,000 5.000% 11/01/19 690,000 690,000 5.000% 11/01/20 725,000 725,000 5.000% 11/01/21 760,000 760,000 5.000% 11/01/22 800,000 800,000 5.150% 11/01/23 840,000 840,000 5.150% 11/01/24 880,000 880,000 5.150% 11/01/25 925,000 925,000 5.150% 11/01/26 975,000 975,000 5.150% 11/01/27 1,020,000 1,020,000 5.150% 11/01/28 1,075,000 1,075,000 5.150% 11/01/29 1,125,000 1,125,000 5.150% 11/01/30 1,180,000 1,180,000 5.150% 11/01/31 1,240,000 1,240,000 5.150% 11/01/32 1,305,000 1,305,000 5.150% 11/01/33 1,370,000 1,370,000

22,235,000 21,680,000 - 420,000 21,260,000

Transportation System Revenue Bonds, 01/12/06 50,365,000 4.50% 11/01/2030 7,065,000 7,065,000 2006 Series A 4.50% 11/01/2031 7,380,000 7,380,000 (Tax Exempt) 4.50% 11/01/2032 7,710,000 7,710,000 Original Issue Amount $50,365,000 4.50% 11/01/2033 8,055,000 8,055,000 4.50% 11/01/2034 9,855,000 9,855,000 4.50% 11/01/2035 10,300,000 10,300,000

- 50,365,000 - 50,365,000

$ 226,755,000 $ 241,160,000 $ 50,365,000 $ 15,650,000 $ 275,875,000

66 South Jersey Transportation Authority Schedule of Toll Revenue Year Ended December 31, 2006

Interchange: Toll Revenue Vehicle Count

Pleasantville $ 13,526,907 26,668,684 Exit 5, Route 9 598,550 1,332,167 Mays Landing 2,521,700 5,491,095 Egg Harbor 38,162,490 19,254,229 Hammonton 832,808 1,745,950 Winslow 419,538 877,107 Williamstown 1,148,385 4,819,046 Pomona 1,457,031 3,211,150 Berlin Crosskeys 810,296 3,420,863 Unusual and Toll Free 778,141 $ 59,477,706 67,598,432

Unusual vehicles include vehicles with special transit permits, fire equipment, ambulance, and patrons without funds.

Toll-free vehicles include employees, emergency vehicles, vendors servicing the Expressway System, and others whom the Authority deems to be necessary and convenient to the operation of the Expressway System.

67 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX B

COPY OF THE RESOLUTION [THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS

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ARTICLE I DEFINITIONS AND INTERPRETATIONS

SECTION 1.01. CERTAIN DEFINITIONS ...... 4 SECTION 1.02. INTERPRETATIONS...... 4

SOUTH JERSEY TRANSPORTATION AUTHORITY ARTICLE II AUTHORIZATION AND ISSUANCE OF BONDS

SECTION 2.01. AUTHORIZATION OF BONDS ...... 4 SECTION 2.02. AUTHORIZATION OF 1992 BONDS;PURPOSE ...... 4 SECTION 2.03. PURPOSES FOR WHICH BONDS MAY BE ISSUED...... 4 SECTION 2.04. CONDITIONS TO THE ISSUANCE OF ALL SERIES OF BONDS ...... 4 SECTION 2.05. CONDITIONS TO ISSUANCE OF BONDS FOR PLEDGED PROJECTS ...... 4 SECTION 2.06. CONDITIONS TO ISSUANCE OF BONDS FOR GENERAL PROJECTS...... 4 SECOND AMENDED AND RESTATED RESOLUTION SECTION 2.07. CONDITIONS TO THE ISSUANCE OF BONDS FOR PURPOSESOFA AUTHORIZING REVENUE BONDS AND OTHER OBLIGATIONS REFUNDING...... 4 SECTION 2.08. SETTLEMENT AND APPLICATION OF THE PROCEEDS OF BONDS...... 4 SECTION 2.09. DETERMINATION OF DEBT SERVICE REQUIREMENTS FOR VARIABLE RATE DEBT,DEMAND OBLIGATIONS;OTHER LONG-TERM OBLIGATIONS...... 4 SECTION 2.10. DESIGNATION OF SPECIAL PROJECTS ...... 4

ARTICLE III FORM, EXECUTION, AUTHENTICATION, MANNER OF PAYMENT Adopted April 19, 2005 REGISTRATION, TRANSFER AND EXCHANGE OF BONDS

SECTION 3.01. FORM OF BONDS ...... 4 SECTION 3.02. DENOMINATIONS,ISSUE DATE,NUMBERING ...... 4 As Amended as of May 11, 2005 by a Certificate of the Acting SECTION 3.03. PLACE,MANNER AND MEDIUM OF PAYMENT OF BONDS ...... 4 Executive Director In Accordance with Section 12.13 Hereof SECTION 3.04. EXECUTION OF BONDS ...... 4 SECTION 3.05. AUTHENTICATION OF BONDS ...... 4 SECTION 3.06. REGISTRATION,EXCHANGE AND TRANSFER OF BONDS;BOND REGISTER...... 4 SECTION 3.07. MUTILATED,DESTROYED,LOST OR STOLEN BONDS ...... 4 SECTION 3.08. OWNERSHIP OF BONDS...... 4 SECTION 3.09. TEMPORARY BONDS ...... 4 SECTION 3.10. BOOK-ENTRY-ONLY SYSTEM OF REGISTRATION ...... 4 SECTION 3.11. PAYMENTS ON HOLIDAYS AND WEEKENDS ...... 4

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TABLE OF CONTENTS TABLE OF CONTENTS (cont’d) (cont’d)

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ARTICLE IV REDEMPTION OF BONDS ARTICLE VII SECTION 4.01. GENERAL PROVISIONS FOR REDEMPTION...... 4 PARTICULAR COVENANTS OF THE AUTHORITY SECTION 4.02. NOTICE OF REDEMPTION...... 4 SECTION 4.03. PAYMENT OF BONDS CALLED FOR REDEMPTION ...... 4 SECTION 7.01. PAYMENT OF BONDS;NO EXTENSIONS OF PAYMENT...... 4 SECTION 7.02. PROTECTION AND PRESERVATION OF OPERATING RIGHTS AND PLEDGE OF REVENUES;FURTHER ASSURANCES ...... 4 ARTICLE V SECTION 7.03. INDEBTEDNESS AND LIENS ...... 4 REVENUES, THEIR APPLICATION AND CERTAIN FUNDS SECTION 7.04. SALE OR ENCUMBRANCE ...... 4 SECTION 7.05. CONSULTING ENGINEER AND TRANSPORTATION CONSULTANT...... 4 SECTION 5.01. PLEDGE OF REVENUES AND OTHER MONEYS...... 4 SECTION 7.06. ANNUAL OPERATING BUDGET ...... 4 SECTION 5.02. ESTABLISHMENT OF FUNDS AND CERTAIN ACCOUNTS ...... 4 SECTION 7.07. LIMITATIONS ON OPERATING EXPENSES ...... 4 SECTION 5.03. ESTABLISHMENT OF OTHER ACCOUNTS AND OTHER FUNDS...... 4 SECTION 7.08. RATES AND CHARGES ...... 4 SECTION 5.04. CONSTRUCTION FUND...... 4 SECTION 7.09. CLASSIFICATIONS OF TOLLS,FARES,FEES AND OTHER CHARGES;FREE SECTION 5.05. DEPOSITS INTO REVENUE FUND AND AIRPORT REVENUE FUND ...... 4 PASSAGE ...... 4 SECTION 5.06. PERIODIC WITHDRAWALS FROM REVENUE FUND ...... 4 SECTION 7.10. INSURANCE COVERAGES...... 4 SECTION 5.07. APPLICATION AND RESTORATION OF DEBT SERVICE FUND ...... 4 SECTION 7.11. RECONSTRUCTION;APPLICATION OF INSURANCE PROCEEDS...... 4 SECTION 5.08. APPLICATION OF DEBT SERVICE RESERVE FUND ...... 4 SECTION 7.12. ACCOUNTS, AND PERIODIC REPORTS AND CERTIFICATES ...... 4 SECTION 5.09. APPLICATION OF REHABILITATION AND REPAIR FUND ...... 4 SECTION 7.13. OFFICES FOR SERVICING BONDS ...... 4 SECTION 5.10. APPLICATION OF SUBORDINATED DEBT FUND ...... 4 SECTION 7.14. CERTAIN TAX COVENANTS ...... 4 SECTION 5.11. APPLICATION OF STATE PAYMENT FUND ...... 4 SECTION 7.15. CONDITIONS PRECEDENT ...... 4 SECTION 5.12. GENERAL RESERVE FUND...... 4 SECTION 7.16. AUTHORITY EXISTENCE AND COMPLIANCE WITH LAWS ...... 4 SECTION 5.13. SUBORDINATED INDEBTEDNESS...... 4 SECTION 7.17. PERFORMANCE OF OBLIGATIONS ...... 4 SECTION 5.14. REBATE FUND;PERIODIC REBATE COMPUTATION;PAYMENT OF SECTION 7.18. TAXES;LIENS...... 4 REBATE...... 4 SECTION 7.19. ENFORCEMENT OF RESOLUTION AND OTHER CONTRACTS...... 4 SECTION 5.15. EARNINGS ON FUNDS ...... 4

ARTICLE VIII ARTICLE VI EVENTS OF DEFAULT AND REMEDIES DEPOSITARIES, SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS SECTION 8.01. EVENTS OF DEFAULT DEFINED ...... 4 SECTION 8.02. ACCELERATION AND ANNULMENT THEREOF ...... 4 SECTION 6.01. DEPOSITARIES...... 4 SECTION 8.03. LEGAL PROCEEDINGS BY TRUSTEE ...... 4 SECTION 6.02 DEPOSITS;SECURITY THEREFOR...... 4 SECTION 8.04. ACCESS TO RECORDS ...... 4 SECTION 6.03. INVESTMENT OF FUNDS...... 4 SECTION 8.05. APPLICATION OF MONEYS AFTER DEFAULT...... 4 SECTION 6.04. VALUATION OF FUNDS ...... 4 SECTION 8.06. DISCONTINUATION OF PROCEEDINGS BY TRUSTEE...... 4 SECTION 6.05. LIQUIDATION OF INVESTMENTS ...... 4 SECTION 8.07. BONDHOLDERS MAY DIRECT PROCEEDINGS...... 4 SECTION 6.06. CHANGES IN RATINGS ON INVESTMENTS;QUALIFIED SWAP SECTION 8.08. LIMITATIONS ON ACTIONS BY BONDHOLDERS ...... 4 AGREEMENTS AND EXCHANGE AGREEMENTS;CREDIT AND LIQUIDITY SECTION 8.09. TRUSTEE MAY ENFORCE RIGHTS WITHOUT POSSESSION OF BONDS...... 4 FACILITIES ...... 4 SECTION 8.10. REMEDIES NOT EXCLUSIVE ...... 4 SECTION 8.11. DELAYS AND OMISSIONS NOT TO IMPAIR RIGHTS...... 4

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ARTICLE IX ARTICLE XII THE FIDUCIARIES MISCELLANEOUS

SECTION 9.01. TRUSTEE,REGISTRAR,PAYING AGENT;APPOINTMENT AND SECTION 12.01. DEFEASANCE ...... 4 ACCEPTANCE OF DUTIES...... 4 SECTION 12.02. EVIDENCE OF SIGNATURES OF BONDHOLDERS AND OWNERSHIP OF SECTION 9.02. ADDITIONAL PAYING AGENTS ...... 4 BONDS ...... 4 SECTION 9.03. OTHER REGISTRARS...... 4 SECTION 12.03. PRESERVATION AND INSPECTION OF DOCUMENTS ...... 4 SECTION 9.04. RESPONSIBILITIES OF FIDUCIARIES ...... 4 SECTION 12.04. CANCELLATION AND DESTRUCTION OF BONDS...... 4 SECTION 9.05. EVIDENCE ON WHICH FIDUCIARIES MAY ACT ...... 4 SECTION 12.05. PARTIES INTERESTED ...... 4 SECTION 9.06. COMPENSATION;INDEMNIFICATION...... 4 SECTION 12.06. NO PERSONAL RECOURSE ...... 4 SECTION 9.07. CERTAIN PERMITTED ACTS...... 4 SECTION 12.07. SUCCESSORS AND ASSIGNS ...... 4 SECTION 9.08. RESIGNATION OF TRUSTEE, OTHER FIDUCIARIES ...... 4 SECTION 12.08. EFFECT OF INVALID PROVISIONS...... 4 SECTION 9.09. REMOVAL OF TRUSTEE ...... 4 SECTION 12.09. RESOLUTION A CONTRACT...... 4 SECTION 9.10. APPOINTMENT OF SUCCESSOR TRUSTEE ...... 4 SECTION 12.10. NOTICES...... 4 SECTION 9.11. TRANSFER OF RIGHTS AND PROPERTY TO SUCCESSOR TRUSTEE...... 4 SECTION 12.11. DESCRIPTIVE HEADINGS ...... 4 SECTION 9.12. MERGER OR CONSOLIDATION ...... 4 SECTION 12.12. GOVERNING LAW...... 4 SECTION 9.13. ADOPTION OF AUTHENTICATION...... 4 SECTION 12.13. AMENDMENT AND RESTATEMENT OF FIRST AMENDED AND RESTATED SECTION 9.14. QUALIFICATIONS OF PAYING AGENTS,REGISTRARS ...... 4 BOND RESOLUTION;EFFECTIVE DATE ...... 4 SECTION 9.15. TRUSTEE NOT DEEMED TO HAVE NOTICE OF DEFAULT...... 4

ARTICLE X SERIES RESOLUTION

SECTION 10.01. CONTENTS;EFFECTIVENESS;FILING ...... 4

ARTICLE XI AMENDMENTS AND SUPPLEMENTS

SECTION 11.01. AMENDMENTS AND SUPPLEMENTS WITHOUT BONDHOLDER CONSENT; WHEN TRUSTEE CONSENT REQUIRED...... 4 SECTION 11.02. AMENDMENTS WITH BONDHOLDERS’CONSENT ...... 4 SECTION 11.03. MAILING ...... 4 SECTION 11.04. MODIFICATIONS BY UNANIMOUS ACTION...... 4 SECTION 11.05. NOTATION ON BONDS ...... 4

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SOUTH JERSEY TRANSPORTATION AUTHORITY Transportation Authority, to provide more coordination of the region’s transportation system and to deal particularly with the highway system, aviation facilities and the transportation problems of Atlantic County through the acquisition, construction, maintenance, operation and support of expressway and transportation projects and economic development facilities directly related to SECOND AMENDED AND RESTATED RESOLUTION transportation projects authorized by the Act. AUTHORIZING REVENUE BONDS AND OTHER OBLIGATIONS The Authority adopted its “Resolution Authorizing Revenue Bonds and Other Obligations” as Resolution No. 1992-64 on December 3, 1992 (the “Original Bond Resolution”) in order to provide for the terms and conditions on which it shall make capital-purpose and other borrowings to effect its statutory purposes. On May 18, 1999, the Authority adopted its Amended and Adopted April 19, 2005 Restated Resolution Authorizing Revenue Bonds and Other Obligations (the “First Amended and Restated Bond Resolution”) in order to amend and restate the Original Bond Resolution pursuant to the terms thereof in connection with the authorization of its Transportation System Revenue BACKGROUND Bonds, 1999 Series. The Authority is adopting this Resolution in order to amend and restate the First Amended and Restated Bond Resolution pursuant to the terms thereof to provide that certain The Legislature of the State of New Jersey by the enactment of Chapter 252 of the Laws payments to be made by the Authority pursuant to Qualified Swap Agreements (as defined herein) of 1991, N.J.S.A. 27:25A-1 ff., the South Jersey Transportation Authority Act approved by the are payable and secured on a parity with the Bonds (as defined herein) and to create and establish a Governor on August 9, 1991 (“Act”), has found and declared that: Subordinated Debt Fund to provide for the payment of Subordinated Indebtedness (as defined herein). -- It is the public policy of the State to provide for the coordinated development and planning of the State’s transportation network at both the State and regional levels. NOW THEREFORE, BE IT RESOLVED BY THE SOUTH JERSEY TRANSPORTATION AUTHORITY AND THE MEMBERS THEREOF, AS FOLLOWS: -- To that end the Transportation Executive Council was established by Executive Order No. 10 of 1990 to coordinate transportation and related activities at the State level. ARTICLE I -- Several authorities and other bodies exist to provide transportation support and DEFINITIONS AND INTERPRETATIONS planning in the northern region of the State. SECTION 1.01. Certain Definitions. As used herein, the following terms and -- In the southern region of the State, increases in residential development, the phrases shall have the following meanings, unless the context clearly otherwise requires: completion of a major Interstate artery in Pennsylvania adjacent to the region, the advent of casino gaming in Atlantic City, and other factors, have caused an increase in traffic flows in southern New “Account” shall mean any account authorized to be established by this Resolution. Jersey. “Accountant” shall mean a certified public accountant or firm thereof (who or which may -- This increase has given rise to the need for a more coordinated region-wide effort be the accountant or the firm of accountants who regularly audit the books and accounts of the to manage the operation and possible extension of the region’s highway system, the improvement Authority), licensed to practice in the State, from time to time selected by the Authority, who and expansion of its aviation facilities, and the coordination of Atlantic County’s transportation shall be Independent. network within the larger regional system. “Accountant’s Certificate” shall mean a certificate executed by the Accountant. -- A factually related, ancillary need also exists to provide for the establishment of economic development facilities directly relating to transportation projects in the region, to be “Accreted Value” shall mean, with respect to Capital Appreciation Bonds, the amount to funded by a public agency directly responsible for regional transportation matters. which, as of any specified time, the principal of any such Bond has been increased by accretion, all as may be provided in an applicable Series Resolution. On the basis of the foregoing considerations and other factors enumerated in the Act, the Legislature has in the Act found and declared that it is in the public interest to create, and “Act” shall mean the South Jersey Transportation Authority Act, Ch. 252, L. 1991, as the accordingly in the Act has created, the South Jersey Transportation Authority, its regional same may be amended and supplemented at the time. jurisdiction to be the counties of Atlantic, Camden, Cape May, Cumberland, Gloucester and Salem, as a successor to the New Jersey Expressway Authority and the Atlantic County

B-2 -2- “Aggregate Debt Service” shall mean, for any calendar year and as of any date of “Airport Subsidy” shall mean, for any period of time, the excess of Airport Costs and calculation the sum of the amounts of Debt Service for such year with respect to all Series of Expenses (other than Debt Service on Airport Bonds) over Airport Revenues (other than Airport Bonds then Outstanding and all Qualified Swap Agreements then in effect. Revenues Available for Debt Service) for such period of time.

“Air Passenger Service” shall mean any service which involves the carriage of persons “Annual Budget” shall mean the Authority’s annual budget, or with reference to a for compensation or hire by aircraft. particular Operating Division of the Authority (established as permitted or required by the Act), such Division’s budget, as amended or supplemented, and in effect for a particular Fiscal Year, “Airport Bonds” means Bonds all or any portion of the proceeds of which are to be as provided for in Section 7.06 hereof. applied to finance or refinance any Costs relating to the Airport, provided that in the case of a Series of Bonds the proceeds of which are to be applied to finance or refinance Costs of the “Atlantic City Expressway” shall mean the expressway project known as the Atlantic Airport as well as other Projects, the term “Airport Bonds” shall be deemed to refer to only such City Expressway constructed by the New Jersey Expressway Authority pursuant to Section 40 of portion of each maturity of such Series of Bonds as shall be applied to finance or refinance Costs P.L. 1962, c. 10 (C. 27:12C-40) and any extensions and modifications thereto. of the Airport, including a proportionate amount of the costs of issuance of such Series of Bonds, all as shall be set forth in the Series Resolution authorizing such Series of Bonds. “Atlantic City International Airport” or “Airport” shall mean the airport authorized by Section24oftheAct. “Airport Costs and Expenses” shall mean any and all Operating Expenses and Costs charged to the Atlantic City International Airport or any part thereof, in accordance with the “Atlantic County Transportation Authority” shall mean the county transportation Authority’s accounting practices and procedures in effect from time to time, including, to the authority authorized pursuant to P.L. 1980, c. 44 (C. 40:35B-1 et seq.). extent permitted by applicable law, Debt Service on Airport Bonds, if any, reimbursements to the Authority for amounts provided by the Authority, whether as a loan or contribution, to pay any “Authority” shall mean the South Jersey Transportation Authority, a public body other Airport Costs and Expenses, and any and all other costs and expenses of the Authority for corporate and politic, with corporate succession, which pursuant to Section 4 of the Act the payment or reimbursement of which Airport Revenues may be applied pursuant to applicable constitutes an instrumentality of the State and in the exercise of the powers conferred by the Act law. shallbedeemedandheldtobeperforminganessentialgovernmentalfunctionoftheState.

“Airport Revenues Available for Debt Service” shall mean, for any period of time, an “Authorized Denomination” shall mean the minimum denomination, or any integral amount of Airport Revenues equal to the Debt Service on all Outstanding Airport Bonds. multiple thereof, in which a particular Series of Bonds may be issued pursuant to the applicable Series Resolution. In the case of Capital Appreciation Bonds, the Authorized Denominations “Airport Revenue Fund” shall mean the Airport Revenue Fund established in Section may be stated in terms of the Original Invested Amount or the Accreted Value at maturity or 5.02 hereof. such earlier time as the Bonds are required to commence the current paying of interest.

“Airport Revenues” shall mean all receipts, revenues, income and other moneys received “Authorized Newspaper” shall mean a newspaper customarily published at least once a or receivable by or on behalf of the Authority from or in connection with the ownership or the day for at least five days (other than legal holidays) in each calendar week, printed in the English operation of the or use of or privileges at the Atlantic City International Airport (other than language and of general circulation in the Borough of Manhattan, City and State of New York, Special Projects), whether in the nature of tolls, fees (including without limitation landing and which may be The Bond Buyer. dockage fees), fares, user charges, concessions, rents, excise levies, surcharges or otherwise, and all rights to receive the same whether in the form of accounts, chattel paper, choses in action, “Authorized Officer” shall mean any member of the Authority or any officer or employee instruments, general intangibles or other rights and all proceeds thereof, and the proceeds of any of the Authority authorized to perform specific acts or duties by the Authority’s by-laws or by insurance coverages on and condemnation awards in respect of any assets of the Authority and resolution. allocable to losses of operating revenues, income or receipts of the types hereinbefore in this definition mentioned or referred to (including, without limitation, the proceeds of any business “Bond” or “Bonds” shall mean any bond or bonds of any Series authenticated and interruption or use and occupancy insurance and any portions of any net condemnation awards delivered under and pursuant to Article II of this Resolution and an applicable Series Resolution, made in respect of lost revenues or disruptions in the receipt thereof), all of the foregoing and which the Authority determines shall have a senior lien or claim on the Revenues and other whether now existing or hereafter coming into existence and whether now owned or held or moneys, securities and funds pledged under the terms of this Resolution pursuant to Section 5.01 hereafter acquired by the Authority, and shall further include all moneys at any time deposited of this Resolution. into the Airport Revenue Fund established hereunder and all earnings on the investment of moneys therein.

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“Bondholder” or “Holder” or “Owner” shall mean any person who shall be the registered or structures on land so acquired, including the cost of acquiring any lands to which such owner of any Bond or Bonds or if coupon Bonds are authorized by a Series Resolution in buildings or structures may be moved, the cost of relocating or reconstructing highways, accordance with Section 3.01 hereof, the bearer of any coupon Bond or Bonds. highway interchanges, access roads to private property, including the cost of land or easements therefor, the response costs, direct and indirect (including but not limited to the costs of testing, “Bond Register” shall mean the register of the Authority maintained by the Trustee for investigation, feasibility studies, remediation, treatment, clean-up, removal, litigation, fines and the registration of ownership, transfer and exchange of Bonds. penalties related thereto), incurred with respect to any environmental hazard or perceived environmental hazard under federal, State or local laws or regulations and any third-party claims “Capital Appreciation Bonds” shall mean any Bonds issued pursuant to this Resolution with respect to such hazard or perceived hazard, the amount of any final award or judgment in, and a Series Resolution which do not pay interest either until maturity or until a specified date or any settlement or compromise of, any proceeding to acquire lands, rights-of-way, easements prior to maturity, but the amount payable at the time payment is made increases periodically by or other interests, the payment of damages caused by construction in the manner provided by accretion to a stated amount. law, the cost of any indemnity and surety bonds and premiums on insurance during construction, administrative expenses, legal fees, cost of audits, the cost of all machinery and equipment, “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor initial inventories, financing expenses, fees and expenses (including reasonable attorneys’ fees thereto, and the regulations promulgated thereunder or applicable thereto, as and expenses) of the Fiduciaries and costs of keeping accounts and making reports required by the same may be in effect from time to time and applicable to any Bonds or other evidences of this Resolution, cost of traffic estimates of every type (including without limitation airport traffic indebtedness issued hereunder. estimates) and of engineering, financial and legal services, plans, specifications, surveys, estimates of costs and revenues, and other expenses necessary or incident to determining the “Commercial Paper” shall mean any note or other obligation of the Authority, subject to feasibility or practicability of constructing or acquiring such Project, amounts, if any, required by renewal at the end of any rate period, other than Variable Rate Debt, the term of which (prior to this Resolution to be paid into the Debt Service Fund, the Debt Service Reserve Fund, the any renewal thereof) does not exceed 270 days. Rehabilitation and Repair Fund or the State Payment Fund, payments, when due (including, without limitation, on any early termination date), under any Qualified Swap Agreement and “Commissioner” shall mean the Commissioner of the Department of Transportation of payments when due (whether at the maturity of principal or the due date of interest or upon other the State. redemption) on any indebtedness of the Authority (other than Bonds), incurred for such Project, all to the extent applicable to the construction and/or acquisition of such Project and payable by “Construct” or “Construction” shall mean the planning, designing, construction, the Authority, and such other expenses payable by the Authority not specified herein as may be reconstruction, rehabilitation, replacement, repair, extension, enlargement, improvement and necessary or incident to the construction and/or acquisition of such Project and the placing of betterment of Expressway Projects and Transportation Projects, and includes the demolition, such Project in operation as aforesaid. clearance and removal of buildings or structures on land acquired, held, leased or used for those projects. “Counsel’s Opinion” shall mean an opinion signed by an attorney or firm of attorneys of recognized standing in the area of law to which the opinion relates, who may be counsel to the “Consulting Engineers” shall mean one or more engineers or engineering firms or Authority. corporations as at the time shall be retained by the Authority pursuant to Section 7.05 hereof to perform the acts and carry out the duties provided for such Consulting Engineers in this “County” or “Counties” shall mean any one or more of the counties of South Jersey, Resolution. consisting of Atlantic, Camden, Cape May, Cumberland, Gloucester and Salem.

“Cost” or “Cost of a Project” shall mean all or any part of the expenses incurred in “Credit Facility” shall mean any letter of credit, standby bond purchase agreement, line connection with the acquisition, construction and maintenance of any real property, lands, of credit, surety bond, insurance policy or other insurance commitment or similar agreement structures, real or personal property rights, rights-of-way, franchises, easements, and interests (other than a Qualified Swap Agreement or an Exchange Agreement), satisfactory to the acquired or used for a Project; any financing charges and reserves for the payment of principal Authority, that is provided by a commercial bank, insurance company or other financial and interest on bonds or notes; the expenses of engineering, appraisal, architectural, accounting, institution, with a current long term rating from the Rating Agencies at least equal to the credit financial and legal services; and other expenses as may be necessary or incident to the rating of any Series of Bonds, and in no event lower than the “A” category established by a acquisition, construction and maintenance of a Project, the financing thereof and the placing of Rating Agency (which may include sub-categories indicated by plus or minus or by numbers), to such Project into operation, including, inter alia, moneys to provide for start-up phase or pre- provide support for a Series of Bonds or for any other obligations authorized hereunder, and shall operational costs and expenses of any Project prior to the same becoming fully operational; and include any Substitute Credit Facility. such term shall mean and include, without limiting the generality of the foregoing, the cost of acquisition, construction and equipping of bridges or crossings over or under rivers, streams or “Credit Issuer” shall mean the issuer of a Credit Facility or any Substitute Credit Facility. other waters or over highways and railroads, the cost of demolishing or removing any buildings

-5- B-3 -6- “Current Net Revenues” shall mean, for any Fiscal Year or other period of time, the Net (iii) With respect to any Qualified Swap Agreement, all Qualified Swap Revenues during such Year or period, excluding any amounts deposited in the Revenue Fund Obligations due and payable by the Authority during the period under the terms and provisions from the General Reserve Fund, but including any investment earnings on the amounts on of such Qualified Swap Agreement. deposit in the General Reserve Fund, whether or not such investment earnings are transferred to the Revenue Fund. The Debt Service Requirements on Variable Rate Debt and, Demand Obligations shall be calculated in accordance with Section 2.09 hereof. “Current Revenues” shall mean, for any Fiscal Year or other period of time, the Revenues during such Year or period, excluding any amounts deposited in the Revenue Fund from the “Debt Service Reserve Fund” shall mean the Debt Service Reserve Fund established in General Reserve Fund, but including any investment earnings on the amounts on deposit in the Section 5.02 hereof. General Reserve Fund, whether or not such investment earnings are transferred to the Revenue Fund. “Debt Service Reserve Requirement” shall mean with respect to all Bonds, an amount equal to the lesser of (i) the maximum annual Principal Installment and interest payable on all “Debt Service” shall mean, for any period, as of any date of calculation and with respect Bonds Outstanding in a calendar year, or (ii) the maximum amount permitted by the Code, being to any Series or Bonds within a Series, an amount equal to the sum of (i) interest accruing during at the date of initial adoption hereof the amount specified in Section 148(d)(2) of the Code; such period on Bonds of such Series, except to the extent that such interest is to be paid from provided, however, that a different Debt Service Reserve Requirement for Bonds issued as Bond proceeds deposited in the Debt Service Fund, (ii) all Qualified Swap Obligations, if any, Variable Rate Debt may be established in the Series Resolution authorizing such Series, and due and payable by the Authority under a Qualified Swap Agreement during such period, and provided further that on conversion of Variable Rate Debt to a fixed rate, the Debt Service (iii) that portion of each Principal Installment for such Series or Bonds within a Series which Reserve Requirement for such Debt shall be increased to the level required by this Resolution. would accrue during such period if such Principal Installment were deemed to accrue monthly from a date one year prior to its due date or from the date of issuance of such Series, whichever “Demand Obligation” shall mean any obligation of the Authority which (a) has a stated is later, such interest and Principal Installments to be calculated on the assumption that Bonds maturity which is more than 365 days after the date of incurrence, and (b) is subject to repayment Outstanding at the date of calculation will cease to be Outstanding by reason, but only by reason, upon demand by the holder prior to maturity. of the payment of each Principal Installment on its due date, provided, however, that in calculating Aggregate Debt Service and Debt Service for purposes of Sections 2.05, 2.06, 2.07 “Department” shall mean the New Jersey Department of Transportation. and 7.08 hereof and in calculating the Net Revenue Requirement for purposes of Sections 2.05, 2.06 and 7.08 hereof, Debt Service on Bonds for which the Authority has entered into a “Depository” shall mean any bank, national banking association, savings or savings and Qualified Swap Agreement shall be calculated assuming that the interest rate on such Bonds loan institution or trust company selected by the Authority and authorized by law to act as a shall equal the stated fixed rate on the Qualified Swap Agreement thereby resulting in no depositary of moneys and securities held under the provisions of this Resolution, and may assumed payment for purposes of clause (ii) above. include the Trustee and may include the New Jersey Cash Management Fund.

“Debt Service Fund” shall mean the Debt Service Fund established in Section 5.02 “Economic Development Facility” shall mean any area, place, building or other hereof. improvement or structure related to, connected with, or in the vicinity of, a Transportation Project which may serve the users of that Project or assist in, enhance or stimulate its operation “Debt Service Requirements” shall mean, with reference to a specified period: or development.

(i) With respect to any Series of Bonds or Bonds within a Series (a) interest “Event of Default” shall mean any of the events specified in Section 8.01 hereof. accruing on such Bonds during the period; and (b) the principal amount of Bonds or the Sinking Fund Installment or other principal portion next maturing or becoming due by virtue of “Exchange Agreement” shall mean, to the extent from time to time permitted by mandatory (but not extraordinary) redemption during the period, as the case may be; applicable law, any interest exchange agreement, interest rate swap agreement, currency swap agreement or other contract or agreement, other than a Qualified Swap Agreement, authorized, (ii) With respect to any other long-term obligations of the Authority (a) interest recognized and approved by the Authority as an Exchange Agreement and providing for (i) accruing on such obligations during the period, (b) amounts required to be paid during the period certain payments by the Authority from the General Reserve Fund, and (ii) payments by an entity with respect to the principal or sinking fund requirements on such obligations, and (c) all lease whose senior long term debt obligations, other senior unsecured long term obligations or claims rental payments on obligations which evidence the acquisition of capital assets; and paying ability, or whose obligations under an Exchange Agreement are guaranteed by an entity whose senior long term debt obligation, other senior unsecured long term obligations or claims paying ability, are assigned a rating (at the time the subject Exchange Agreement is entered into) by the Rating Agencies at least equal to the rating assigned by the Rating Agencies to the

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applicable Series of Bonds, Subordinated Indebtedness or other obligations of the Authority, and “First Amended and Restated Bond Resolution” shall mean the Amended and Restated in no event lower than the “A” category established by a Rating Agency (which may include Resolution Authorizing Revenue Bonds and Other Obligations adopted by the Authority on May subcategories indicated by plus or minus or by numbers); which payments by the Authority and 18, 1999, as amended and supplemented. counterparty are calculated by reference to fixed or variable rates and constituting a financial accommodation between the Authority and such counterparty. “Fiscal Year” shall mean the period January 1 through December 31, or such other one- year fiscal period as the Authority may from time to time determine by resolution. “Excluded Revenues” shall mean Revenues, if any, other than Expressway toll and concession revenues, that do not equal more than 15% of each year’s total projected annual “Fitch” shall mean Fitch Investors Service, Inc. and any successor thereto. Revenues in the aggregate and that the Authority directs the Transportation Consultant to exclude from a certificate to be delivered pursuant to Section 2.05(c)(i) or Section 2.06(c)(i). “Fund” shall mean any fund established or authorized to be established by Sections 5.02 and5.03hereof. “Expressway Project” shall mean the acquisition, construction and maintenance of the Atlantic City Expressway as transferred to the Authority pursuant to the Act and of any express “General Project” shall mean a Project which the Authority is authorized to undertake highway, super highway or motorway at the locations and between the termini as may hereafter pursuant to the Act, and which the Authority has designated a General Project. be established by law and acquired or to be acquired or constructed or to be constructed under the provisions of the Act by the Authority, over which abutters have no easements or rights of “General Project ABT Revenue Estimate” shall have the meaning set forth in Section light, air or direct access by reason of the fact that their properties abut thereon, and shall include 2.06(c)(i). but not be limited to all bridges, Parking Facilities, tunnels, overpasses, underpasses, interchanges, traffic circles, grade separations, entrance plazas, approaches, toll houses, service “General Reserve Fund” shall mean the General Reserve Fund established in areas, stations and facilities, communications, facilities, administration, storage and other Section5.02hereof. buildings, and other structures related to the use of the express highway, superhighway or motorway, intersecting highways and bridges and Feeder Roads which the Authority may deem “Government Grant” shall mean, with respect to the Transportation System, any sum of necessary or desirable for the operation of the Project, together with all property rights, money which is hereafter received or which is receivable by or on behalf of the Authority from easements and interests which may be acquired by the Authority for the construction or the the United States of America, or any instrumentality, authority or agency thereof, or from the operation of the Project, and includes any planning necessary for the execution of any State of New Jersey, or any municipality, authority or agency thereof, as or on account of a grant Expressway Project. or contribution for the (a) planning, design, construction, acquisition, operation or development of any Transportation System component or Costs associated therewith, or (b) financing of any “Federal Securities” shall mean (i) any direct and general obligations of, or any such planning, design, construction, acquisition, operation or development. obligations guaranteed by, the United States of America, including but not limited to interest obligations of the Resolution Funding Corporation or any successor thereto, (ii) any obligations “Government Loan” shall mean, with respect to the Transportation System, any sum of of any state or political subdivision of a state (“Refunded Bonds”) which are fully secured as to money which is hereafter received or which is receivable by or on behalf of the Authority from principal and interest by an irrevocable pledge of moneys or direct and general obligations of, or the United States of America, or any instrumentality, authority or agency thereof, or from the obligations guaranteed by, the United States of America, which moneys or obligations are State of New Jersey, or any instrumentality, municipality, authority or agency thereof, as or on segregated in trust and pledged for the benefit of the holders of the Refunded Bonds, and account of a loan which is repayable by the Authority in accordance with the terms established (iii) certificates of ownership of the principal or interest of direct and general obligations of, or with respect thereto for the (a) planning, design, construction, acquisition, operation or other obligations guaranteed by, the United States of America, which obligations are held in trust by a development of any Transportation System component or Costs associated therewith, or commercial bank which is a member of the Federal Reserve System. (b) financing of any such planning, design, construction, acquisition, operation or development.

“Feeder Road” shall mean any road which in the determination of the Authority is “Independent” shall mean a Person: (a) who is not a member of the Authority; (b) who is necessary to create or facilitate access to a Project and is not longer than the length permitted by not an officer or employee of the Authority; or (c) which is not a partnership, corporation or the Act. association having a partner, director, officer, member or substantial stockholder who is a member of the Authority, or an officer or employee of the Authority; provided, however,thatthe “Fiduciary” or “Fiduciaries” shall mean the Trustee, the Registrar and the Paying Agents, fact that such Person is retained regularly by or transacts business with the Authority shall not or any or all of them, as may be appropriate. make such Person an employee within the meaning of this definition.

“Interest Payment Date” shall mean any date on which interest is due and payable in respect of Bonds of a Series pursuant to the terms hereof and of such Bonds.

-9- B-4 -10- Issuer, if any, and the Trustee shall have received written confirmation from such third “Investment Securities” shall mean any of the following securities legal for the party that it holds such securities, free and clear of any lien, as agent for the Trustee, investment of Authority funds at the time of purchase thereof: (c) a perfected first security interest under the Uniform Commercial Code, (i) Federal Securities; or book entry procedures prescribed at 31 CFR 306.1 et seq. or 31 CFR 350.0 et seq. or a successor provision in such securities is created for the benefit of the Trustee, (ii) Bonds, debentures, notes or other evidences of indebtedness issued by any agency or instrumentality of the United States to the extent such obligations are guaranteed by (d) the repurchase agreement has a term of six months or less, or the the United States or by another such agency the obligations (including guarantees) of which are Authority will value the collateral securities no less frequently than monthly and will guaranteed by the United States; liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two business days of such valuation, (iii) Bonds, debentures, notes or other evidences of indebtedness issued by any corporation chartered by the United States, including, but not limited to: Government National (e) the repurchase agreement matures on or before a debt service payment Mortgage Association, Federal Land Banks, Federal Home Loan Mortgage Corporation, Federal date (or, if held in a Fund other than the Debt Service Fund, Debt Service Reserve Fund National Mortgage Association, Federal Home Loan Banks, Federal Intermediate Credit Banks, or Subordinated Debt Fund, other appropriate liquidation period), and Banks for Cooperatives, Tennessee Valley Authority, United States Postal Service, Farmers Home Administration, Resolution Funding Corporation, Export-Import Bank, Federal Financing (f) the fair market value of the securities in relation to the amount of the Bank and Student Loan Marketing Association; repurchase obligation is equal to the collateral levels established by a Rating Agency for the rating assigned by the Rating Agency to the seller. (iv) Negotiable or non-negotiable certificates of deposit (or other time deposit arrangements) issued by any bank, trust company or national banking association, including a (vii) Banker’s acceptances, eurodollar deposits and certificates of deposit (in Fiduciary, which certificates of deposit shall be continuously secured or collateralized by addition to the certificates of deposit provided for by subparagraphs (iv) and (v) above) of the obligations described in subparagraphs (i) or (ii) of this definition, which shall have a market domestic branches of foreign banks having a capital and surplus of $1,000,000,000 or more, or value at all times at least equal to the principal amount of such certificates of deposit and shall be any bank or trust company organized under the laws of the United States of America or Canada, lodged with the Trustee, as custodian, by the bank, trust company or national banking association or any state or province thereof, having capital and surplus, in the amount of $1,000,000,000; issuing such certificates of deposit; provided that the aggregate maturity value of all such banker’s acceptances and certificates of deposit held at any time as investments of funds under this Resolution with respect to any (v) Uncollateralized negotiable or non-negotiable certificates of deposit (or other particular bank, trust company, or national association shall not exceed 5% of its capital and time deposit arrangements) issued by any bank, trust company or national banking association, surplus; and provided further that any such bank, trust company, or national association shall be the unsecured obligations of which are rated in one of the two highest rating categories, without rated in one of the two highest rating categories, without regard to rating sub-categories, by both regard to rating sub-categories, by Moody’s and S&P; Moody’s and S&P;

(vi) Repurchase agreements collateralized by obligations described in (viii) Other obligations of the United States of America or any agency thereof subparagraphs (i), (ii) or (iii) of this definition with any registered broker/dealer subject to the which may then be purchased with funds belonging to the State of New Jersey or which are legal Securities Investors’ Protection Corporation jurisdiction, which has an uninsured, unsecured and investments for savings banks in the State of New Jersey; unguaranteed obligation rated “Prime-1” or “A3” or better by Moody’s and “A-1” or “A” or better by S&P, or any commercial bank with the above ratings, provided: (ix) Deposits in the New Jersey Cash Management Fund;

(a) a master repurchase agreement or specific written repurchase (x) Obligations of any state, commonwealth or possession of the United States or agreement governs the transaction, which characterizes the transaction as a purchase and a political subdivision thereof or any agency or instrumentality of such a state, commonwealth, sale of securities, possession or political subdivision, provided that at the time of their purchase such obligations are rated in either of the two highest rating categories by both Moody’s and S&P; (b) the securities are held free and clear of any lien, by the Trustee or an independent third party acting solely as agent for the Trustee, and such third party is (i) a (xi) Commercial paper with a maturity date not in excess of 270 days rated by the Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Rating Agencies at least equal to the rating assigned by the Rating Agencies to the applicable Corporation and which has combined capital, surplus, and undivided profits of not less Series of Bonds and in no event lower than the “A” category established by a Rating Agency than $75,000,000, or (iii) a bank approved in writing for such purpose by each Credit (which may include subcategories indicated by plus or minus or by numbers) at the time of such

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investment, issued by an entity incorporated under the laws of the United States or any state (b) The sum of the Aggregate Debt Service for such period (excluding any thereof; Debt Service on Outstanding Bonds for which capitalized interest is available to pay), Rehabilitation and Repair Requirements, State Payment Requirement, debt service payable (xii) Shares of a diversified open-end management investment company as defined during the period on Subordinated Indebtedness, Operating Expenses of General Projects, and in the Investment Company Act of 1940, which is a money market fund, which is then rated in other required deposits to Funds, including the Debt Service Reserve Fund and Rebate Fund. any of the three highest rating categories by any nationally recognized bond rating agency which is then rating the Bonds or money market accounts of the Trustee or any bank or trust company “Net Revenues” shall mean, for any Fiscal Year or other period of time, the Revenues organized under the laws of the United States or any state thereof which has a combined capital during such Year or period, less the amounts of the Operating Expenses of Pledged Projects for and surplus of not less than $50,000,000; and such Fiscal Year or period, to the extent Operating Expenses have not been paid by moneys other than Revenues, but before payment of Debt Service Requirements. (xiii) Investment contracts (a) providing for the future purchase of securities of the type described in (i), (ii), (iii) and (viii) above, which contracts have been approved for sale by a “New Jersey Expressway Authority” shall mean the authority created pursuant to national securities exchange and all regulatory authorities having jurisdiction or (b) the obligor L. 1962, c. 10 (N.J.S.A. 27:12C-1 et seq.). under which or the guarantor thereof shall have a credit rating such that its long term debt is rated at least “A+” by Standard & Poor’s Corporation if the Bonds are then rated by such Rating “1992 Bonds” shall mean the 1992 Series A Bonds and the 1992 Series B Bonds. Agency and at least “A1” by Moody’s Investors Services, Inc. if the Bonds are then rated by such Rating Agency. “1992 Bonds Series Resolution” shall mean the Series Resolution authorizing the 1992 Bonds. “Liquidity Facility” shall mean any letter of credit, line of credit or standby loan commitment made available to fund repurchases of Variable Rate Debt, Commercial Paper or “1992 Capital Projects” shall mean the capital expenditures which were undertaken by Subordinated Indebtedness upon maturity or mandatory or optional tender of such obligations; the Authority with a portion of the proceeds of the 1992 Series B Bonds, as described in the 1992 such Liquidity Facility may be part of, or separate from, any Credit Facility or Substitute Credit Bonds Series Resolution. Facility supporting such obligations. “1992 Series A Bonds” shall mean the Authority’s Transportation System Revenue “Moody’s” shall mean Moody’s Investors Service, Inc. and any successor thereto. Bonds, 1992 Series A (Taxable Expressway Refunding Project), which were issued as Taxable Obligations under the 1992 Bonds Series Resolution. “Marine Passenger Service” shall mean any service which involves the carriage of persons for compensation or hire by waterborne craft. “1992 Series B Bonds” shall mean the Authority’s Transportation System Revenue Bonds, 1992 Series B (Tax-Exempt) which were issued as Tax-Exempt Obligations under the “Motorbus Charter Service” shall mean subscription, tour and other special motorbus 1992 Bonds Series Resolution. services. “Operating Division” shall mean the airport division of the Authority established “Motorbus Regular Route Service” shall mean the operation of any motorbus or pursuant to Section 9.a. of the Act or any other Operating Division of the Authority permitted to motorbuses on streets, public highways or other facilities, over a fixed route and between fixed be established pursuant to Section 9.c. of the Act. termini on a regular schedule for the purpose of carrying passengers, for hire or otherwise, within South Jersey or between points within South Jersey and points without South Jersey. “Operating Expenses” shall mean the Authority’s expenses for operation, maintenance (but only those maintenance expenses which have not been capitalized as Costs of a Project), “Municipality” shall mean any city, borough, village, town or township in South Jersey repairs, ordinary replacement and ordinary reconstruction of Pledged Projects and General but not a County or a school district. Projects and ordinary acquisition of equipment therefor, including, without limiting the generality of the foregoing, all policing, administrative and engineering expenses, legal and “Net Revenue Requirement” shall mean an amount of Net Revenues and Airport financial advisory expenses, fees and expenses of the Fiduciaries, required payments to pension, Revenues Available for Debt Service for the period under consideration equal to the greater of: retirement, health and hospitalization funds, insurance premiums, Credit Facility fees (except Credit Facility fees, charges and premiums to the extent such fees, charges and premiums are (a) 120% of the Aggregate Debt Service for such period (excluding any Debt treated as interest under the Code) and any provision of reserves for self-insurance, all arbitrage Service on Outstanding Bonds for which capitalized interest is available to pay); or rebate payments required by Section 148 of the Code to be made from time to time to the United States Treasury, and any other current expenses or obligations required to be paid by the Authority under the provisions of this Resolution or by law, all to the extent properly and

-13- B-5 -14- directly attributable to the operation of Pledged Projects and General Project, but excluding any “Parking Facility” shall mean any area or place, garage, building, or other improvement Costs or expenses for Special Projects, new construction or any allowance for depreciation and or structure for the parking or storage of motor or other vehicles, including but not limited to all any costs and expenses paid or required to be paid by any party other than the Authority in real property and personal property, driveways, roads and other structures or areas necessary or respect of any of the foregoing. Notwithstanding the foregoing, references in this Resolution to useful or convenient for access to a facility from a public street, road or highway, or from any Operating Expenses of General Projects shall be deemed to refer, in the case of the Airport, only transportation project; meters, mechanical equipment necessary or useful or convenient for or in to the Airport Subsidy. connection with that parking or storage; and any structures, buildings, space or accommodations, whether constructed by the Authority or by the lessee, to be leased for any business, commercial “Original Authority” shall mean the New Jersey Expressway Authority or the Atlantic or other use, including the sale of gasoline or accessories for, or the repair or other servicing of County Transportation Authority. automobiles and other motor vehicles, if, in the opinion of the Authority, the inclusion, provision and leasing is necessary to assist in defraying the expenses of the Authority and make possible “Original Bond Resolution” shall mean the “Resolution Authorizing Revenue Bonds and the operation of the parking facility at reasonable rates, but the Authority shall not itself engage Other Obligations” adopted by the Authority as Resolution No. 1992-64 on December 3, 1992. in the sale of gasoline or accessories for, or in the repair or other servicing of automobiles or other motor vehicles except in emergency, nor in the sale of any service or commodity of trade “Original Invested Amount” shall mean with respect to a Capital Appreciation Bond the or commerce. amount paid for such Bond at original issuance thereof. “Paying Agent” shall mean any bank, national banking association or trust company “Outstanding” in connection with the Bonds shall mean, as of the time in question, all designated as paying agent for the Bonds of any Series, and any successor or successors Bonds authenticated and delivered under the Resolution, except: appointed under this Resolution.

(a) Bonds theretofore cancelled or required to be cancelled under Section 12.04 “Payment Date” shall mean (i) each Interest Payment Date, (ii) any date on which a hereof; Principal Installment or mandatory Sinking Fund Installment is due to be paid on any Bond, or (iii) any date on which any Qualified Swap Obligations are due and payable by the Authority (b) Bonds for which the payment or redemption of which the necessary amount under any Qualified Swap Agreement. shall have been or shall concurrently be deposited with the Trustee and be available for payment thereof pursuant to Section 12.01(a) hereof or for which provision for payment shall have been “Permitted Encumbrances” shall mean, as of any particular time: made in accordance with Section 12.01(b) hereof; provided that, if such Bonds are being redeemed prior to maturity, the required notice of redemption shall have been given or (i) liens for taxes or any other governmental charges not then delinquent or then provisions satisfactory to the Trustee shall have been made therefor; and being contested in good faith;

(c) Bonds in substitution for which other Bonds have been authenticated and (ii) utility, access and other easements and rights of way, restrictions and delivered pursuant to Article II hereof. In determining whether the holders of a requisite exceptions that in the opinion of the Consulting Engineer will not interfere with or impair the use aggregate principal amount of Bonds Outstanding have concurred in any request, demand, by the Authority of the associated Project; authorization, direction, notice, consent or waiver under the provisions hereof, Bonds which are held by or on behalf of the Authority shall be disregarded for the purpose of any such (iii) any mechanic’s, laborer’s, materialman’s, supplier’s or vendor’s lien or right determination. in respect thereof if payment is not yet due and payable or is being contested in good faith;

When used in connection with Subordinated Indebtedness or other obligations permitted (iv) such minor defects, irregularities, encumbrances, easements, rights of way, to be issued hereunder, the term Outstanding shall mean such Subordinated Indebtedness or other and clouds on title as normally exist with respect to property similar in character to the real estate obligations issued and at the time unpaid, other than those which would be excluded from the which is part of a Project and which do not, in the opinion of the Consulting Engineer, materially above definition of Outstanding if they were Bonds. impair the property affected thereby for the purpose for which it was acquired or is held by the Authority pursuant to the terms of this Resolution; “Paratransit Service” shall mean any service, other than motorbus regular route service and motorbus charter service, including but not limited to, dial-a-ride, non-regular route, jitney (v) any interest in land and/or any improvements on or to be placed on such land, or community minibus, and shared-ride services such as vanpools, limousines or taxicabs which which may be granted, given, leased or sold by the Authority in connection with any Economic are regularly available to the public. Paratransit services shall not include limousine or taxicab Development Facility; and service reserved for the private and exclusive use of individual passengers.

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(vi) any lease, license or easement entered into pursuant to and in accordance with “Qualified Swap or Qualified Swap Agreement” shall mean, with respect to a Series of the provisions of Section 7.04 hereof. Bonds, any financial arrangement (i) that is entered into by the Authority with an entity that is a Qualified Swap Provider at the time the arrangement is entered into; (ii) which provides that the “Pledged Project” shall mean the Projects for which the 1992 Bonds were issued (except Authority shall pay to such entity an amount based on the interest accruing at a fixed rate on an for the Project constituting the acquisition of the parking garage facility occupied by the Atlantic amount equal to the principal amount of the Outstanding Bonds of such Series, and that such County Transportation Authority, which shall be a General Project) and, in addition to those entity shall pay to the Authority an amount based on the interest accruing on a principal amount Projects, a Project (i) which generates Revenues sufficient to pay the Operating Expenses and initially equal to the same principal amount as such Bonds, at a variable rate of interest computed Rehabilitation and Repair Requirement associated with such Project in the Fiscal Year in which according to a formula set forth in such arrangement (which need not be the same as the actual such Project becomes operational or is designated a Pledged Project by the Authority, and rate of interest borne by the Bonds) or that one shall pay to the other any net amount due under (ii) which is reasonably projected by the Authority to generate Revenues sufficient to pay such such arrangement; and (iii) which has been designated in writing to the Trustee by an Authorized Project’s associated Operating Expenses and Rehabilitation and Repair Requirement for each of Officer as a Qualified Swap Agreement with respect to the Bonds; provided, however,thatifthe the five (5) Fiscal Years following the year in which such Pledged Project becomes operational Bonds corresponding to such Qualified Swap Agreement are retired in whole, unless the or is so designated by the Authority. The Authority shall not redesignate a General Project as a Qualified Swap Agreement is also terminated, the Qualified Swap Provider shall then be entitled Pledged Project unless it delivers to the Trustee prior to the effectiveness of such redesignation, a to receive a Counsel’s Opinion from the law firm or firms rendering an opinion as to the Certificate of an Authority Officer to the effect set forth in clause (i) of the preceding sentence Authority’s obligations under the Qualified Swap Agreement on its date of issue, as to whether and projections made by a Consulting Engineer to the effect set forth in clause (ii) of the or not the Qualified Swap Agreement is a valid and binding obligation of the Authority after preceding sentence. such retirement of the Bonds under then existing law.

“Pledged Project ABT Revenue Estimate” shall have the meaning set forth in Section “Qualified Swap Obligations” shall mean all amounts due and payable by the Authority 2.05(c)(i). under the terms of any Qualified Swap Agreement other than amounts due and payable by the Authority as a result of the early termination, in whole or in part, of such Qualified Swap “Principal Installment” shall mean, as of any particular date of calculation and with Agreement. respect to a particular Series of Bonds, an amount equal to the principal amount (or original invested amount) of Outstanding Bonds of such Series maturing on a single future date plus the “Qualified Swap Provider” shall mean, with respect to a Series of Bonds, an entity whose principal amount of any Bonds of such Series required to be redeemed by operation of any senior long term debt obligations, other senior unsecured long term obligations or claims paying sinking fund Account established in respect of such Series or other mandatory (but not ability or whose payment obligations under a Qualified Swap Agreement are guaranteed by an extraordinary) redemption. entity whose senior long term debt obligations, other senior unsecured long term obligations or claims paying ability are assigned a rating (at the time the subject Qualified Swap Agreement is “Project” shall mean an Expressway Project or Transportation Project and the costs entered into) by the Rating Agencies at least equal to the rating assigned by the Rating Agencies associated therewith. to the applicable Series of Bonds and in no event lower than the “A” category established by a Rating Agency (which may include sub-categories indicated by plus or minus or by numbers). “Public Highway” shall mean any public highway, road or street in South Jersey, including federal aid highways, whether maintained by the State or by a county, municipality or “Rail Passenger Service” shall mean the operation of railroad, subway, or light rail other governmental subdivision in South Jersey. systems including fixed and automated guideway systems for the purpose of carrying passengers in South Jersey or between points within South Jersey and points without South Jersey. “Public Transportation Facility” shall mean, in connection with Public Transportation Service, passenger stations, shelters and terminals, automobile and bus parking facilities, ramps, “Rating Agency” shall mean severally or collectively, if applicable (i) Standard & Poor’s track connections, signal systems, power systems, information and communication systems, Corporation and any successor thereto, if it has assigned a rating to any Bonds, (ii) Moody’s roadbeds, transit lanes or rights of way, equipment storage and servicing facilities, bridges, grade Investors Service and any successor thereto, if it has assigned a rating to any Bonds, and crossings, rail cars, locomotives, motorbuses and other motor vehicles, maintenance and garage (iii) Fitch Investors Service, Inc. and any successor thereto, if it has assigned a rating to any facilities, revenue handling equipment and any other equipment, facility or property useful or Bonds. If any such Rating Agency shall no longer perform the functions of a securities rating related to the provision of transportation service. service for whatever reason, the term “Rating Agency” shall thereafter be deemed to refer to the others, but if both of the others shall no longer perform the functions of a securities rating service “Public Transportation Service” shall mean rail passenger service, motorbus regular route for whatever reason, the term “Rating Agency” shall thereafter be deemed to refer to any other service, paratransit service, motorbus charter service and marine passenger service. nationally recognized rating service or services as shall be designated in writing by the Authority to the Trustee.

-17- B-6 -18- “Real Property” shall mean lands within the State, above or below water, and Authority, and shall further include all moneys at any time deposited into the Revenue Fund improvements thereof or thereon, or any riparian or other rights or interests therein. established hereunder and all earnings on the investment of moneys in the other Funds and Accounts established hereunder, to the extent available for application as Revenues under the “Record Date” shall mean in respect of a particular Series of Bonds the fifteenth day terms hereof, but shall not include Airport Revenues, Government Grants or Loans, or any other (whether or not a business day) next preceding each Interest Payment Date, or such other day as sums which by the conditions for receipt thereof or otherwise under applicable law or regulation may be determined in a Series Resolution. are not available to be applied generally as Revenues, and further shall not include the proceeds of any borrowing (or refinancing thereof) received by the Authority for the purpose of defraying “Redemption Price” shall mean, with respect to any Bond, the principal amount thereof the Cost of any Project or any Scheduled Counterparty Payments or other amounts received by plus the applicable premium, if any, payable upon redemption thereof. the Authority under the terms of any Qualified Swap Agreement or Exchange Agreement.

“Refunding Bonds” shall mean all Refunding Bonds issued pursuant to Section 2.07 “Scheduled Counterparty Payments” shall mean all amounts received by the Authority hereof. resulting from a regularly scheduled payment obligation of the counterparty under the terms of any Qualified Swap Agreement or Exchange Agreement. Notwithstanding anything in this “Registrar” shall mean any bank, national banking association or trust company Resolution to the contrary, “Scheduled Counterparty Payments” shall not include any amounts designated as registrar for the Bonds of any Series, and its successor or successors appointed received by the Authority upon the execution of, or as a result of the early termination of, any under this Resolution. Qualified Swap Agreement or Exchange Agreement, or as a result of any expense reimbursement or other non-recurring, non-scheduled payment obligation of the counterparty under the terms of “Rehabilitation and Repair Requirement” shall mean for each Fiscal Year of the any Qualified Swap Agreement or Exchange Agreement. Authority that amount which the Authority shall provide in the Annual Budget sufficient to make deposits to the Rehabilitation and Repair Fund for the account of each Pledged Project: (i) to “Series” shall mean all of the Bonds authenticated and delivered on original issuance in a restore or prevent physical damage to each such Project or any part thereof, (ii) for the safe and simultaneous transaction, and any Bonds thereafter authenticated and delivered in lieu of or in efficient operation of each such Project, or (iii) to prevent loss of Revenues generated by such substitution for such Bonds pursuant to Article II or Sections 3.06 or 3.07 hereof. Project[s]. In providing for the Rehabilitation and Repair Requirement, the Authority shall include amounts sufficient to maintain a minimum balance in the account of the Rehabilitation “Series Resolution” shall mean any resolution of the Authority adopted pursuant to and Repair Fund established for Pledged Expressway Projects equal to either (A) $5,000,000, Article II hereof to authorize the issuance of a Series of particular Bonds. through and including December 31, 2000 and $6,000,000 from and after January 1, 2001, or (B) such lesser amount as shall otherwise be determined to be sufficient for any Fiscal Year by the “Series 2005 Notes” shall mean the Subordinated Notes, Series 2005 issued by the Consulting Engineer. Authority on March 30, 2005 in the aggregate principal amount of $10,400,000 under and pursuant to the 2005 Subordinated Indebtedness Resolution adopted by the Authority on March “Resolution” shall mean this resolution as at the time amended and supplemented in 11, 2005 and ratified on March 18, 2005, as amended and supplemented. accordance herewith. “Sinking Fund Installment” shall mean with respect to each Series of Bonds, each amount “Revenue Fund” shall mean the Revenue Fund established in Section 5.02 hereof. so designated which is established pursuant to Section 2.04(a) hereof.

“Revenues” shall mean all receipts, revenues, income and other moneys received or “South Jersey” shall mean the geographical area composed of the six Counties. receivable by or on behalf of the Authority from or in connection with the ownership or the operation of the or use of or privileges at the Transportation System (other than Special Projects), “Special Payment Date” shall mean a date fixed by the Trustee for the payment of whether in the nature of tolls, fees (including without limitation landing and dockage fees), fares, defaulted interest on a Bond whenever moneys become available for payment of defaulted user charges, concessions, rents, excise levies, surcharges or otherwise, and all rights to receive interest. the same whether in the form of accounts, chattel paper, choses in action, instruments, general intangibles or other rights and all proceeds thereof, and the proceeds of any insurance coverages “Special Project” shall mean a Project the financing and operation of which does not on and condemnation awards in respect of any assets of the Authority and allocable to losses of pledge or have a claim on the general credit of the Authority or any Revenues, and is not entitled operating revenues, income or receipts of the types hereinbefore in this definition mentioned or to the benefits of this Resolution, but which Project financing and the operating expenses of such referred to (including, without limitation, the proceeds of any business interruption or use and Special Project are payable solely from any source other than Revenues. occupancy insurance and any portions of any net condemnation awards made in respect of lost revenues or disruptions in the receipt thereof), all of the foregoing whether now existing or hereafter coming into existence and whether now owned or held or hereafter acquired by the

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“Special Record Date” shall mean the fifteenth (15th) day (whether or not a business day) “Tax-Exempt Obligations” shall mean Bonds of the Authority the interest on which is preceding a Special Payment Date or such other day as shall be established by a Series intended to be excluded from gross income of the Owners thereof for purposes of federal income Resolution. tax, except for any alternative minimum or similar tax.

“S&P” shall mean Standard & Poor’s Corporation and any successor thereto. “Transfer Date” shall mean, with respect to the New Jersey Expressway Authority, the date on which all bonds issued by New Jersey Expressway Authority cease to be outstanding “State” shall mean the State of New Jersey. within the meaning of the resolutions pursuant to which those bonds were issued, as certified by the trustee or trustees thereunder and, with respect to the Atlantic County Transportation “State Payment” shall mean the sum of $2,500,000, payable annually by the Authority to Authority, the date on which New Jersey Economic Development Authority first mortgage the State, pursuant to the Agreement, dated November 17, 1983, between the Authority (as revenue bonds, series of 1980, dated July 1, 1980 (New York Parking Associates – Parking successor to the New Jersey Expressway Authority) and the State Department of Transportation, Authority of Atlantic City project) issued by the New Jersey Economic Development Authority or any extension or renewal thereof or additional agreement with the State, the Department or the cease to be outstanding within the meaning of the resolution or indenture pursuant to which those Transportation Trust Fund Authority. bonds were issued, as certified by the trustee thereunder or the date on which the South Jersey Transportation Authority certifies to the Atlantic County Transportation Authority for a “State Payment Fund” shall mean the State Payment Fund established in Section 5.02 predecessor authority to the Atlantic County Transportation Authority and the State Treasurer hereof. that it assumes all debts and obligations of the Atlantic County Transportation Authority.

“State Payment Requirement” shall mean that amount which, when added to amounts “Transportation Consultant” shall mean one or more Independent firms or corporations at already on deposit in the State Payment Fund and the interest income thereon, is equal to the the time retained by the Authority pursuant to Section 7.05 hereof to perform the acts and carry State Payment for the applicable fiscal year. out the duties provided for such Transportation Consultant in this Resolution.

“Subordinated Debt Fund” shall mean the Subordinated Debt Fund established in Section “Transportation Facility” shall mean any area, place, building or other structure designed 5.02 hereof. to provide rail passenger service, motorbus regular route service, paratransit service, motorbus charter service, air passenger and air freight service, or marine passenger service, or any two or “Subordinated Debt Obligations” shall mean all obligations of the Authority to pay the more of these services, to the public, and includes passenger stations, shelters and terminals, air principal of and interest on Subordinated Indebtedness and any other payment obligations of the passenger terminals, hangars, heliports, docking and launching facilities, parking facilities, Authority under the terms of any Subordinated Indebtedness. ramps, track connections, signal systems, power systems, information and communication systems, roadbeds, transit lanes or rights of way, equipment storage and servicing facilities, “Subordinated Indebtedness” shall mean any evidence of indebtedness permitted to be bridges, grade crossings, rail cars, locomotives, motorbus and other motor vehicles, boats, ferries issued by Section 5.13 and Section 7.03 hereof, including, without limitation, the Series 2005 and other marine vehicles, aircraft, maintenance and garage facilities, revenue handling Notes. equipment and any other equipment, facility or property useful for or related to the provision of these services. “Substitute Credit Facility” shall mean any letter of credit, standby bond purchase agreement, line of credit, surety bond, insurance policy or other insurance commitment or similar “Transportation Project” shall mean the acquisition, construction, and maintenance of an agreement (other than a Qualified Swap Agreement or an Exchange Agreement), satisfactory to airport, Public Transportation Facility or other Transportation Facility, established by the Act or the Authority, that replaces a Credit Facility and is provided by a commercial bank, insurance which may be hereafter established by law and may include related facilities and activities which company or other financial institution with a current long term credit rating from Moody’s and may consist of public transportation services, Public Transportation Facilities, including but not S&P not lower than the credit rating of any Series of Bonds. limited to rail and bus stations and terminals, noise abatement projects, Parking Facilities, Public Highways and Feeder Roads related to or connected with the such Project, and any economic “Supplemental Resolution” shall mean any resolution of the Authority adopted pursuant development facilities as defined in the Act. Transportation Project includes any planning to Article XI hereof. necessary to develop a comprehensive, efficient, convenient or economical transportation system in South Jersey, any planning or marketing necessary or desirable for the execution of any “Taxable Obligations” shall mean Bonds of the Authority the interest on which is Transportation Project, and any planning, acquisition, construction or operation of Economic intended by the Authority to be includable in gross income of the Owners thereof for purposes of Development Facilities related to, connected with, or in the vicinity of the project. federal income tax.

-21- B-7 -22- “Transportation System” shall mean Public Highways, Expressway Projects, SECTION 2.01. Authorization of Bonds. The Authority may from time to time Transportation Projects, and all other methods of transportation for the movement of people and issue one or more Series of Bonds, for one or more of the purposes set forth in Section 2.03 goods in South Jersey. hereof, upon compliance with the applicable conditions for issuance set forth in this Article II.

“Transportation Trust Fund Authority” shall mean the New Jersey Transportation Trust SECTION 2.02. Authorization of 1992 Bonds; Purpose. Fund Authority established by section 4 of P.L. 1984, c. 73 (C. 27:1B-4). (a) Pursuant to Section 2.02 of the Original Bond Resolution, the 1992 Bonds “Trustee” shall mean the trustee appointed pursuant to Article IX hereof, and any were authorized to be issued on compliance by the Authority solely with the provisions of successor or successors appointed under this Resolution. Section 2.04(a) through (i) thereof. The term, denominations, issuance and payment dates, interest rates to be borne, provisions for redemption and other particular terms of the 1992 “Variable Rate Debt” shall mean obligations of the Authority, other than Commercial Bonds, to the extent not provided for in the Original Bond Resolution, were determined by the Paper, Subordinated Indebtedness, or obligations converted for any period through a Qualified 1992 Bonds Series Resolution. Swap Agreement, bearing interest at a variable rate and specifying a maximum rate of interest permitted by law; provided, however, that obligations bearing interest at a variable rate, which (b) The 1992 Series A Bonds and 1992 Series B Bonds proceeds were applied are issued concurrently in equal par amounts with other obligations bearing interest at a variable to (i) the acquisition of the assets of the Original Authorities through refunding of the rate and which are required to remain Outstanding in equal amounts at all times, the net effect of Expressway Authority’s outstanding bonds and the purchase of a parking facility occupied by the which at all times is a fixed rate of interest to the Authority, shall not be deemed or considered to Atlantic County Transportation Authority, (ii) the deposit in the Construction Fund of amounts be Variable Rate Debt for purposes of this Resolution. The Authority shall not issue Bonds in required for the 1992 Capital Projects, (iii) the deposit of an amount equal to the Debt Service the form of Variable Rate Debt which exceed in aggregate principal amount twenty percent Reserve Requirement into the Debt Service Reserve Fund, and (iv) the payment of issuance (20%) of the aggregate principal amount of Bonds Outstanding immediately after the issuance of costs. The foregoing shall be a purpose for the issuance of Bonds described in Section 2.03 such Variable Rate Debt. hereof.

SECTION 1.02. Interpretations. The words “hereof,” “herein,” “hereto,” hereby,” SECTION 2.03. Purposes for Which Bonds May Be Issued. Bonds may be and “hereunder” (except in the form of Bond), refer to the entire Resolution. issued, authenticated and delivered from time to time for any one or more of the following purposes: Every “request,” “requisition,” “order,” “demand,” “application,” “notice,” “statement,” “certification,” “consent” or similar action hereunder by the Authority shall, unless the form (a) To meet all or a part of the Costs of a Pledged Project. thereof is specifically provided, be in writing signed by an Authorized Officer. (b) To meet all or a part of the Costs of a General Project. Words denoting persons include firms, associations and corporations, and all words denoting the singular number include the plural number and vice versa; and all words importing (c) To provide additional moneys to complete any Pledged or General Project, the masculine gender import the feminine gender and vice versa. including reimbursing the Authority for any such completion Costs.

All words and terms used in this Resolution and not defined above or elsewhere herein (d) To provide moneys in excess of net insurance proceeds or condemnation shall have the same meanings as set forth in the Act, if defined therein. All words and terms awards to meet the Costs of restoring a Pledged or General Project after a casualty loss or a defined above shall have, in addition to the meanings set forth above, the meanings ascribed taking. thereto at the time in the Act, if defined therein. In case of any conflict between the provisions of this Resolution and the Act, the provisions of the Act shall prevail. (e) To provide all or part of the moneys necessary to refund or advance- refund any or all Outstanding Bonds or Subordinated Indebtedness issued under this Resolution Whenever in this Resolution any consent, permission or approval is required, such or obligations of the Authority issued under other resolutions of the Authority or the Original consent, permission or approval shall not be unreasonably or untimely withheld. Authorities, including accrued and unpaid interest, redemption premium, if any, and all costs and expenses incident to such issuance and redemption.

ARTICLE II SECTION 2.04. Conditions to the Issuance of All Series of Bonds. Bonds of AUTHORIZATION AND ISSUANCE OF BONDS each Series may be executed by the Authority and delivered to the Trustee and thereupon shall be authenticated by the Trustee and delivered to the Authority or upon its order, but only upon the receipt by the Trustee, at or prior to such authentication, of:

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that, as of the time immediately after the delivery of such Bonds by the Trustee and payment, (a) A copy of the Series Resolution authorizing such Bonds, certified by an deposit or application of their proceeds in accordance with this Resolution, no default in the Authorized Officer and specifying: payment of the principal of or interest on any of the Outstanding Bonds or in compliance with any of the provisions of this Resolution exists; (1) The authorized principal amount and Series designation of such Bonds; (h) A Counsel’s Opinion addressed to the Trustee to the effect that the Resolution is in full force and effect and is valid and binding upon the Authority and enforceable (2) The purposes for which such Series of Bonds is being issued; in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency or other laws or legal or equitable principles affecting creditors’ rights (“Creditors’ Rights (3) The Series issuance date, Interest Payment Date, and maturity date Limitations”), and creates the valid pledge which it purports to create of the Revenues and other or dates of the Bonds; moneys pledged under this Resolution, subject only to the provisions hereof establishing the priorities of such pledge and permitting the withdrawal, payment, setting apart or appropriation (4) The interest rate or rates to be borne by such Bonds; the Accreted of Revenues and other moneys for or to the purposes and on the terms and conditions set forth Values and yields to maturity for Capital Appreciation Bonds; or the manner of herein; and that the Authority is duly authorized and entitled to issue such Bonds and, upon the determining the interest rate or rates for Variable Rate Bonds; execution, authentication and delivery thereof, such Bonds shall be duly and validly issued and shall constitute valid and binding obligations of the Authority, enforceable in accordance with (5) The Authorized Denominations and the manner of numbering and their terms, subject to Creditors’ Rights Limitations, and entitled to the benefits of this lettering the Bonds; Resolution;

(6) The Registrar and the Paying Agent or Paying Agents for the (i) The Closing Statement provided for in Section 2.08 hereof; Bonds (if different than the Trustee so appointed hereunder); (j) The other certificates, instructions, moneys and documentation required (7) The Redemption Price or Prices, if any, and any redemption terms hereunder in respect of the issuance of Bonds for particular Projects and purposes; and for the Bonds of such Series not determined herein; and (k) In the case of Bonds issued to finance the Costs of an Economic (8) The amount and due date of each Sinking Fund Installment, if any, Development Facility, a statement from the Transportation Consultant setting forth the projected in respect of the Bonds. impact of that Economic Development Facility on the Transportation Project related to, connected with or in the vicinity of such proposed Economic Development Facility or on the (b) A copy of this Resolution, certified by an Authorized Officer; users of that Transportation Project.

(c) A copy of every Supplemental and Series Resolution theretofore adopted SECTION 2.05. Conditions to Issuance of Bonds for Pledged Projects. Bonds by the Authority, certified by an Authorized Officer; may be issued to pay all or a part of the Costs of a Pledged Project and shall be authenticated and delivered by the Trustee only upon receipt by it of the matters enumerated in Section 2.04 above (d) A certification of an Authorized Officer stating that neither this Resolution and the following: nor any Supplemental or Series Resolution has been repealed, rescinded or modified (except as may be specified in such certificate) and that a copy of every Supplemental and Series (a) A certificate of an Authorized Officer setting forth (1) the Current Net Resolution theretofore adopted by the Authority has been delivered to the Trustee; Revenues and Airport Revenues Available for Debt Service for any period of 12 consecutive calendar months out of the 24 calendar months next preceding the authentication and delivery of (e) The written order of the Authority directing the authentication and the Bonds of such Series, provided that if any adjustment of tolls, fares, fees and other charges delivery of the Bonds of such Series, signed by an Authorized Officer; shall have been placed in effect subsequent to the beginning of such 12-month period, such Current Net Revenues shall reflect the relevant Revenues which the Transportation Consultant estimates in (f) A receipt, signed by an Authority Officer, stating that the proceeds of sale a certificate delivered with their certificate delivered pursuant to clause (c) of this Section would of such Bonds have been received by or on behalf of the Authority and setting forth the amount have resulted had such rate adjustment been in effect for the entire 12-month period, and (2) the of such proceeds, including accrued interest; Net Revenue Requirement for such 12 calendar months (without regard to the Bonds proposed to be issued), which certificate shall demonstrate that such Current Net Revenues and Airport (g) Except in connection with Bonds being issued to effect a refunding or Revenues Available for Debt Service equal or exceed such Net Revenue Requirement; advance-refunding as provided in Section 2.03(e), a certification of an Authority Officer stating

-25- B-8 -26- (b) A certificate of the Transportation Consultant stating whether, to the best of Estimate and the certificate delivered pursuant to clause (d) of this Section, for the current and each their knowledge, any Federal, State or other agency is then projecting or planning the construction, future calendar year through the aforesaid third full calendar year, and stating that such estimated improvement or acquisition of any facility which, in the opinion of the Transportation Consultant, Current Net Revenues and Airport Revenues Available for Debt Service shall, in the current and may be materially competitive with the Pledged Project being financed with the Bonds proposed to each future calendar year until the aforesaid third calendar year, satisfy the Net Revenue be issued, and the estimated date of completion of such highway or other facility; Requirement and, in the third full calendar year after the estimated date when the proposed Pledged Project will be placed in service, equal at least the greater of (i) 120% of the maximum annual (c) An estimate of Revenues and Airport Revenues Available for Debt Service Aggregate Debt Service on all Bonds at the time Outstanding, including the proposed Series of (the “Pledged Project ABT Revenue Estimate”) consisting of: Bonds, and all Qualified Swap Obligations, and (ii) the sum of 100% of the maximum annual Aggregate Debt Service on all obligations of the Authority Outstanding hereunder, including all (i) a certificate of the Transportation Consultant setting forth for the Qualified Swap Obligations, plus the projected Rehabilitation and Repair Requirements, State then current and each future calendar year to and including the third full calendar year after Payment Requirement, debt service payable on Subordinated Indebtedness, Operating Expenses of the estimated date when the proposed Pledged Project will be placed in service, estimates General Projects, and other required deposits to Funds, including the Debt Service Reserve Fund of Revenues (other than Excluded Revenues, if any) and Airport Revenues Available for and Rebate Fund, for such year; and Debt Service giving effect to (1) the completion of construction of any uncompleted Pledged Project including the proposed Pledged Project; (2) the assumption that any (2) A certificate of an Authorized Officer to the effect that: competitive facility referred to in their certificate delivered pursuant to clause (b) of this Section will be completed on the date therein estimated and will thereafter be in operation Current Net Revenues and Airport Revenues Available for Debt Service determined during the period covered by such estimates, and (3) any adjustment of rates which shall as set forth in paragraph (a) of this Section 2.05, less Operating Expenses of General Projects, are have been placed in effect subsequent to the beginning of the 12-month period referred to equal to at least 100% of maximum annual Debt Service on all Bonds Outstanding, including the in the certificate of an Authorized Officer delivered pursuant to clause (a) of this Section, Bonds proposed to be issued, and all Qualified Swap Obligations. The computation of Debt as if such rate adjustment had been in effect from the beginning of such period until the Service in the preceding sentence may exclude Debt Service payable from the following sources: effective date of any further rate adjustment, as described next, and (4) any further rate adjustment with respect to such Pledged Project, in addition to that referred to in clause (a) (i) a residual agreement with an airline having an investment grade of this Section, which in the opinion of the Transportation Consultant, would be necessary rating from the Rating Agencies, entered into for Airport Projects having a general airport to enable the Authority to continue to meet the Net Revenue Requirement (taking into purpose; or account the projected debt service on the proposed Bonds). Notwithstanding the foregoing, if the proposed Pledged Project is an Expressway Project, no effect shall be given to a (ii) an unconditional obligation of one or more political subdivisions of further rate adjustment with respect to such proposed Pledged Project as described in clause the State assigned a general obligation rating of at least “A” by Moody’s or S & P (or both (4) of the preceding sentence except for rates to be charged at an already established if rated by both); or schedule for such proposed Pledged Project; and (iii) an obligation of the State or one or more of its agencies or (ii) with respect to Excluded Revenues, if any, either (A) the instrumentalities if the obligation is rated at least “A” by the Rating Agencies; or Authority’s statement of actual unadjusted Revenues received by the Authority during the prior 12-month period, as included in the Authorized Officer’s certificate provided in (iv) an obligation of an instrumentality or agency of the United States of paragraph (a) above, or (B) the Authority’s estimates of such Excluded Revenues; America or a federally chartered corporation if the obligation is rated at least “AA” and “Aa”, respectively, by the Rating Agencies. (d) (i) A certificate of the Consulting Engineers setting forth (1) for the years and on the assumptions specified in the Pledged Project ABT Revenue Estimate, estimates of The obligations and contracts described in clauses (i) through (iv) must have a term the Operating Expenses of Pledged Projects, giving effect to the construction of any planned, equal to the final maturity of the proposed Series of Bonds. proposed or otherwise uncompleted Pledged Project, (2) the estimated total Cost of Construction of each such uncompleted Pledged Project, and (3) the estimated date of completion of each such SECTION 2.06. Conditions to Issuance of Bonds for General Projects. Bonds uncompleted Pledged Project; and (ii) a certificate of an Authorized Officer setting forth for may be issued to pay all or a part of the Costs of a General Project and shall be authenticated and General Projects the same type of information included in the Consulting Engineer’s certificate for delivered by the Trustee only upon receipt by it of the matters enumerated in Section 2.04 above Pledged Projects, as provided in the above clause (d)(i); and and the following:

(e) (1) A certificate of an Authorized Officer setting forth the estimated (a) A certificate of an Authorized Officer setting forth (1) the Current Net Current Net Revenues, using the information contained in the Pledged Project ABT Revenue Revenues and Airport Revenues Available for Debt Service for any period of 12 consecutive

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calendar months out of the 24 calendar months next preceding the authentication and delivery of of this Section, for the current and each future calendar year through the aforesaid third full the Bonds of such Series, provided that if any adjustment of rates shall have been placed in effect calendar year, and stating that such estimated Current Net Revenues and Airport Revenues subsequent to the beginning of such 12-month period, such Current Net Revenues shall reflect Available for Debt Service, if any, shall, in each of the calendar years through the third full the relevant Revenues to be generated by all Projects which the Transportation Consultant calendar year after the estimated date when the proposed General Project will be placed in estimates in a certificate delivered with their certificate delivered pursuant to clause (c) of this service, equal at least the greater of (1) 120% of the maximum annual Aggregate Debt Service Section would have resulted had such rate adjustment been in effect for the entire 12-month on all Bonds at the time Outstanding, including the proposed Series of Bonds, and all Qualified period, and (2) the Net Revenue Requirement for such 12 calendar months (without regard to the Swap Obligations, and (2) the sum of 100% of the maximum Annual Debt Service on all Bonds proposed to be issued), which certificate shall demonstrate that such Current Net obligations of the Authority Outstanding hereunder, including all Qualified Swap Obligations, Revenues and Airport Revenues Available for Debt Service equal or exceed such Net Revenue plus the projected Rehabilitation and Repair Requirements, State Payment Requirement, debt Requirement, and that such Net Revenues and Airport Revenues Available for Debt Service service payable on Subordinated Indebtedness, Operating Expenses of General Projects, and equal at least 120% of maximum Aggregate Debt Service, inclusive of the Bonds proposed to be other required deposits to Funds, including the Debt Service Reserve Fund and Rebate Fund, for issued; such year.

(b) A certificate of the Transportation Consultant stating whether, to the best SECTION 2.07. Conditions to the Issuance of Bonds for Purposes of a of their knowledge, any Federal, State or other agency is then projecting or planning the Refunding. One or more Series of Bonds may be issued to refund any or all Outstanding Bonds construction, improvement or acquisition of any other facility which, in the opinion of the or Subordinated Indebtedness and to make deposits in any Fund under this Resolution as Transportation Consultant, may be materially competitive with any Project or Projects, and the determined by the Authority in the Series Resolution authorizing such Bonds, and shall be estimated date of completion of such highway or other facility; authenticated and delivered by the Trustee only upon receipt by it of the matters enumerated in Section 2.04 above and the following (Bonds issued for such refunding purposes are referred to (c) An estimate of Revenues and Airport Revenues Available for Debt in this Section 2.07 as “Refunding Bonds”): Service (the “General Project ABT Revenue Estimate”) consisting of: (a) Such instructions to the Trustee as are necessary to comply with all (i) A certificate of the Transportation Consultant setting forth for the requirements set forth in Section 12.01 hereof so that the Bonds to be refunded will be paid or then current and each future calendar year to and including the third full calendar year deemed to be paid pursuant to that Section; after the estimated date when the General Project will be placed in service, estimates of Revenues (other than Excluded Revenues, if any) and Airport Revenues Available for (b) Either (1) moneys in an amount sufficient to effect payment of the principal Debt Service to be generated by all Projects, giving effect to the construction of any or Redemption Price, if applicable, and interest due and to become due on the Bonds to be uncompleted Project, on the assumption that any competitive facility referred to in their refunded on and prior to the redemption date or maturity date thereof, as the case may be, which certificate delivered pursuant to clause (b) of this Section will be completed on the date moneys shall be held by the Trustee or any one or more of the Paying Agents in a separate account therein estimated and will thereafter be in operation during the period covered by such irrevocably in trust for the Holders of the Bonds to be refunded, or (2) Federal Securities in such estimates, and employing for purposes of such certificate the schedule of tolls and other principal amounts, of such maturities, and bearing interest at such rates as shall be necessary, rates and charges in effect on the date of such certificate; and together with the moneys, if any, deposited with the Trustee at the same time, to comply with the provisions of subsection (b) of Section 12.01 hereof; (ii) with respect to Excluded Revenues, if any, either (A) the Authority’s statement of actual unadjusted Revenues received by the Authority during the (c) Either: prior 12-month period, as included in the Authorized Officer’s certificate provided in paragraph (a) above, or (B) the Authority’s estimates of such Excluded Revenues; (1) A certificate of an Authorized Officer demonstrating that the term of the Refunding Bonds is not greater than the term of the refunded Bonds or other (d) A certificate of the Consulting Engineers setting forth (1) for the years and obligations being refinanced, and the Debt Service Requirements on the Refunding on the assumptions specified in the General Project ABT Revenue Estimate, estimates of the Bonds in each Fiscal Year shall not be greater than 105% of the maximum annual Debt Operating Expenses, giving effect to the construction of any planned, proposed or otherwise Service on the refunded Bonds or obligations being refunded; provided that the greater uncompleted Project, (2) the estimated total Cost of Construction of each such uncompleted debt service on the Refunding Bonds shall be occasioned by the issuance of Refunding Project, and (3) the estimated date of completion of each such uncompleted Project; and Bonds to satisfy the Debt Service Reserve Requirement and to fund associated issuance and refunding costs, including redemption premium; or (e) A certificate of an Authorized Officer setting forth the estimated Current Net Revenues and Airport Revenues Available for Debt Service using the information contained (2) Debt Service on the Refunding Bonds is not greater than Debt in the General Project ABT Revenue Estimate and the certificate delivered pursuant to clause (d) Service on the Refunded Bonds in any year in which the Refunded Bonds would have been

-29- B-9 -30- Outstanding, but only if maximum annual Debt Service on the Refunding Bonds is less The Trustee shall open a Settlement Account in respect of each Series of Bonds and than maximum Annual Debt Service on the Refunded Bonds; or deposit therein the proceeds of the sale of such Bonds. From the Settlement Account, the Trustee shall make the deposits and pay or reserve the amounts set forth in the Closing Statement (3) If the requirements of (1) or (2) above are not met, then the required by this Section 2.08. Authority shall meet the requirements of either Section 2.05 hereof, if the Bonds being refinanced are at the time related to a Pledged Project, or Section 2.06 hereof, if the Bonds Any reserves which shall be set up in the Settlement Account shall be disbursed from being refinanced are at the time related to a General Project. time to time by the Trustee pursuant to written directions of an Authorized Officer.

(d) If the Refunding Bonds are being proposed to be issued to refinance SECTION 2.09. Determination of Debt Service Requirements for Variable Rate Subordinated Indebtedness, the Refunding Bonds shall be authenticated and delivered by the Debt, Demand Obligations; Other Long-Term Obligations. TrusteeonlyuponreceiptbyitofthemattersenumeratedinSection2.04aboveandthefollowing: (a) Variable Rate Debt. For the purpose of determining Variable Rate Debt, (1) The matters required to be furnished pursuant to Section 2.05 hereof the interest rate shall be the lower of: if the obligations being refinanced are at the time related to a Pledged Project, or Section 2.06 hereof if the obligations being refinanced are at the time related to a General (1) the maximum interest rate in the Series Resolution or other Project. resolution authorizing such Variable Rate Debt; or

(2) A certificate of the lender or representative or trustee then duly (2) if and so long as an interest rate guaranty agreement or interest rate appointed or acting under the indenture, resolution or other instrument securing and protection agreement is in effect with an institution that is rated by a Rating Agency in a authorizing such Subordinated Indebtedness, that (A) provision has been duly made for the category that is at least equal to the rating assigned by a Rating Agency to the Series of redemption or payment at maturity of such Subordinated Indebtedness in accordance with Bonds, the maximum interest rate payable by the Authority in accordance with such the terms thereof, (B) the pledge, if any, pursuant to Section 7.03 securing such agreement. Subordinated Indebtedness shall have been discharged and satisfied, and (C) such lender, representative or trustee for Subordinated Indebtedness holds in trust the moneys or For the purpose of determining the interest on any Debt which has been tendered securities required to effect such redemption or payment. for payment and is held pursuant to a standby purchase agreement or other liquidity facility at the time the Debt Service Requirements for such Variable Rate Debt are being calculated, the (3) A Counsel’s Opinion to the effect that all actions required under the interest on such Debt shall be the maximum rate payable pursuant to such liquidity facility. indenture, resolution or other instrument securing and authorizing such Subordinated Indebtedness to provide for the redemption or payment of such Subordinated Indebtedness (b) Demand Obligations. For the purpose of determining the Debt Service have been taken. Requirements on a Demand Obligation, the Debt Service Requirement of such Demand Obligation shall be deemed to be the greater of: SECTION 2.08. Settlement and Application of the Proceeds of Bonds. The Authority shall furnish to the Trustee at the time each Series of Bonds is authenticated, a Closing (1) The Debt Service Requirements payable under the terms of such Statement signed by an Authorized Officer showing: (a) the amount of the proceeds of the sale Demand Obligation, assuming none of such Demand Obligations are tendered, if such of the Bonds, including accrued interest, if any; (b) the amount to be deposited in the Demand Obligation bears interest at a variable rate, the interest thereon shall be determined Construction Fund to pay the Costs of any Project, and the application thereof to the purchase of pursuant to paragraph (a) above; or temporary investments which shall be specified in the Closing Statement, or if applicable the amounts to be deposited to effect the refunding of any Bonds or Subordinated Indebtedness; (2) The amount payable by the Authority to reimburse any third party (c) amounts payable with respect to the financing costs of the Series of Bonds, whether payable which has paid any such Demand Obligations which have been tendered (including interest at settlement of the sale of the Bonds or reserved on instructions of the Authority; and (d) the at the rate specified in the Authority’s agreement with such third party) plus the principal amount of accrued and capitalized interest, if any, on the Bonds to be deposited in the Debt payable on any such Demand Obligations which have not been tendered. Service Fund, and the amount, if any, to be deposited into the Debt Service Reserve Fund so that the amount therein shall equal the Debt Service Reserve Requirement, and the application of all (c) The Debt Service Requirements on any other type of obligation of the of such moneys to the purchase of temporary investments, which shall be specified in the Authority having a maturity of more than 365 days and not provided for in this Resolution, shall Closing Statement. be calculated as provided in the Series Resolution or other resolution of the Authority authorizing the issuance of such obligation.

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(d) For the purpose of determining the Debt Service Requirements on Series Resolution authorizing the Series of which such Bond is a part, as to be distinguished Variable Rate Debt or Demand Obligations for an historical test period, the actual Debt Service from every other Bond. paid shall be used. SECTION 3.03. Place, Manner and Medium of Payment of Bonds. The (e) The conversion of Bonds constituting Variable Rate Debt to bear interest principal of and interest on the Bonds issued and to be issued hereunder, and the redemption at a different variable rate or a fixed rate or rates in accordance with the terms of such Bonds premium, if any, payable thereon, shall be payable in lawful money of the United States of shall not constitute a new issuance of Bonds under this Resolution. America, which at the time of payment is legal tender for the payment of public and private debts therein. SECTION 2.10. Designation of Special Projects. Principal or Accreted Value on the Bonds shall be payable at the corporate trust office of (a) The Authority may not designate a Project as a Special Project unless it the Trustee designated by the Trustee upon presentation and surrender of Bonds as the same shall delivers to the Trustee a certificate of an Authorized Officer to the effect that such designation become due and payable. and the removal of the Revenues generated by such Project from the calculation of the Net Revenue Requirement would not have caused the Authority to breach its covenant in Bonds shall bear interest from the stated issue date of the Series of which they are a part, Section 7.08 hereof had such designation and removal of such Revenues occurred in the if authenticated prior to the first Interest Payment Date for such Series, from the date of immediately preceding Fiscal Year. authentication if authenticated on an Interest Payment Date to which interest has been paid, or from the preceding Interest Payment Date in all other cases. (b) Holders of obligations issued or assumed by the Authority to finance the Costs of Special Projects shall have no right or claim to any amounts held by or payable to the Interest on the Bonds (other than Capital Appreciation Bonds) will be paid on each Trustee hereunder or be entitled to any right or benefit under this Resolution. Interest Payment Date by check or draft mailed by the Trustee to the person in whose name a Bond is registered on the Bond Register, at the close of business on the Record Date, at the address of such person appearing on the Bond Register. Any such interest not so timely paid or ARTICLE III duly provided for shall cease to be payable to the person who is the registered owner thereof as FORM, EXECUTION, AUTHENTICATION, MANNER OF PAYMENT of such Record Date, and shall be payable upon moneys becoming available for such purpose (in REGISTRATION, TRANSFER AND EXCHANGE OF BONDS whole or in part) to the person who is the registered owner thereof at the close of business on the Special Record Date preceding the Special Payment Date. Notice of the Special Payment Date SECTION 3.01. Form of Bonds. Each Series of Bonds shall be initially issued in shall be mailed to the registered owners as of the Special Record Date. form substantially as set forth in Exhibit ”A” annexed hereto and made a part hereof, with appropriate modifications and omissions, as may be determined in the associated Series SECTION 3.04. Execution of Bonds. All Bonds issued hereunder shall be Resolution. executed in the name of the Authority by the manual or facsimile signature of its Chairman or Vice-Chairman and the corporate seal of the Authority shall be affixed, imprinted or reproduced Unless otherwise specified in an applicable Series Resolution, the Bonds of a Series shall thereon and attested by the manual or facsimile signature of its Secretary or Assistant Secretary. be issued solely in the form of fully registered Bonds without coupons. If the Authority Any such Bonds may be authenticated, issued and delivered notwithstanding that one or more of determines to issue coupon Bonds, the provisions governing the dating, payment, exchange, the officers signing such Bonds or whose facsimile signature shall be upon such Bonds shall ownership and other details of such coupon Bonds shall be set forth in the Series Resolution have ceased to be such officer or officers at the time when such Bonds shall actually be authorizing such Series of Bonds. The Authority shall not be required or permitted to issue delivered, or notwithstanding that at the Series issue date of the Bonds any such person shall not coupon Bonds, or exchange registered Bonds for coupon Bonds as hereinafter provided, if have been such officer of the Authority. issuance of coupon Bonds might cause the interest on any Series of Bonds or any Subordinated Indebtedness issued as Tax-Exempt Obligations to become includible in the gross income of SECTION 3.05. Authentication of Bonds. No Bonds shall become valid or Bondholders for purposes of Federal income taxation; however, in its discretion the Authority obligatory for any purpose until such Bonds shall have been authenticated by the Trustee by the may determine to issue Bonds as Taxable Obligations, and in such case, the Authority may, if it manual signature of an authorized signer thereof, and such authentication by the Trustee upon so determines in the applicable Series Resolution, issue coupon Bonds. any Bond shall be conclusive evidence that the Bond so authenticated has been duly authenticated and delivered hereunder and that the Registered Owner thereof is entitled to the SECTION 3.02. Denominations, Issue Date, Numbering. Bonds of each Series benefit of the trust and lien hereby created. The Bonds shall be dated the date of authentication shall be issued in such denominations, bear such Series issue date as shall be determined by and registration thereof unless such date is prior to the first Interest Payment Date for such Series Series Resolution, and shall be so lettered and numbered, as provided in this Resolution or the of Bonds, in which event such Bonds shall be dated and bear interest from the original issuance date of such Series of Bonds. Capital Appreciation Bonds shall be dated the date of initial

-33- B-10 -34- issuance thereof (unless the associated Series Resolution shall provide otherwise) and thereafter SECTION 3.07. Mutilated, Destroyed, Lost or Stolen Bonds. Upon receipt by on any transfer or exchange on the date of authentication. the Authority and the Trustee of evidence satisfactory to both of them that any Outstanding Bond has been mutilated, destroyed, lost or stolen, and of indemnity satisfactory to both of them, the SECTION 3.06. Registration, Exchange and Transfer of Bonds; Bond Register. Trustee shall, at the written direction of the Authority, authenticate and deliver a new Bond of The Authority shall keep or cause to be kept at the principal corporate trust office of the Trustee the same Series and same maturity and of like tenor in exchange and in substitution for, and upon books for the registration, exchange and transfer of Bonds in the manner provided therein so long surrender and cancellation of, the mutilated Bond, or in lieu of and in substitution for the Bond as any of the Bonds shall remain Outstanding. No transfer of Bonds shall be valid unless made so destroyed, lost or stolen. by the Registered Owner in person or by his duly authorized attorney at the principal corporate trust office of the Trustee, upon surrender of such Bonds accompanied by a duly executed Any Bondholder requesting a new Bond authenticated and delivered under the provisions instrument of transfer in form and with guaranty of signature satisfactory to the Trustee. Upon of this Section shall pay the expenses, including counsel fees, which may be incurred by the such transfer a new fully registered Bond or Bonds of the same maturity, in authorized Authority and the Trustee in connection therewith. In case any such mutilated, destroyed, lost or denominations, and bearing the same rate of interest shall be issued to the transferee or the stolen Bond has become or shall become due and payable on the next Interest Payment Date, the transferor, as may be reasonably requested. The Authority shall exchange, register or transfer or Trustee, in its discretion, may, instead of issuing a new Bond, direct the payment thereof and the cause to be exchanged, registered or transferred therein, Bonds, as hereinafter provided, and Trustee shall thereupon pay the same on the due date. under such reasonable regulations as it or the Trustee may prescribe. At the option of the Holder, Bonds may be exchanged for other Bonds of any other authorized denomination of a like Any Bond issued under the provisions of this Section 3.07 in lieu of any Bond alleged to aggregate principal amount and bearing the same rate of interest, upon surrender of the Bonds to be mutilated, destroyed, lost or stolen, shall constitute an original additional contractual be exchanged at the principal corporate trust office of the Trustee. Whenever any Bonds are so obligation on the part of the Authority, whether or not the Bond so alleged to be mutilated, surrendered for exchange, the Trustee shall at the direction of the Authority authenticate and destroyed, lost or stolen be at any time enforceable by anyone, and shall be equally and deliver the Bonds which the Bondholder making the exchange is entitled to receive. The Trustee proportionately entitled to the benefits of this Resolution with the Bond being replaced. is hereby appointed the Registrar of the Authority for the purpose of registering, exchanging and transferring the Bonds. SECTION 3.08. Ownership of Bonds. The Authority and the Trustee may treat the Registered Owner of any Bond (or the holder of any coupon Bond not registered or registered Registration and transfer of registration of Bonds authorized under this Section 3.06 shall to bearer) as the absolute owner of such Bond for all purposes whether or not such Bond shall be be made without charge to the Holder of any Bond, provided that the Holder, as a condition overdue, and neither the Authority nor the Trustee shall be affected by any notice to the contrary. precedent to the exercise of such privilege, shall pay any taxes or other governmental charges Any consent, waiver or other action taken by the holder or Registered Owner of any Bond shall imposed thereon. be conclusive and binding upon such Registered Owner, his heirs, successors or assigns, and upon all transferees of such Bonds whether or not notation of such consent, waiver or other The Authority and the Trustee shall not be required (a) to exchange or transfer any Bonds action shall have been made on such Bond or on any Bond issued in exchange therefor. during a period beginning on the fifteenth day next preceding any date of mailing of notice of Bonds to be redeemed and ending on the date of such mailing or (b) to exchange or transfer any SECTION 3.09. Temporary Bonds. Bonds in definitive form shall be printed or Bonds which have been selected or called for redemption in whole or part. lithographed on steel-engraved borders or in such other form as shall be set forth in the associated Series Resolution. Until Bonds in definitive form are ready for delivery, the If at any time following the issuance of any Series of Bonds, Bonds may be issued in Authority may execute, and upon its request in writing, the Trustee shall authenticate and deliver bearer form with coupons without causing the interest payable with respect thereto to be in lieu of any thereof, and subject to the same provisions, limitations and conditions, one or more includible in the taxable income of the Holder thereof (as evidenced by the written opinion of printed, lithographed or typewritten Bonds in temporary form, substantially of the tenor of the nationally recognized bond counsel), then the Trustee shall on the written request of the owner of Bonds herein described with appropriate omissions, variations and insertions. Such Bond or any Bonds issue coupon Bonds, registrable as to principal only in Authorized Denominations, in Bonds in temporary form may be for the amount of any authorized denomination or any multiple exchange for a like amount of fully registered Bonds, in substantially the form of the fully thereof, as the Authority may determine. Until exchanged for a Bond or Bonds in definitive registered Bond as it appears in Exhibit “A” to this Resolution, with such omissions, variations form such Bond or Bonds in temporary form shall be entitled to the lien and benefit of this and changes as shall be necessary or appropriate. Interest payable with respect to such coupon Resolution. Unless otherwise agreed with the Registered Owner of such temporary Bond or Bonds shall be payable at the principal corporate trust office of the Trustee upon surrender of the Bonds, the Authority shall, without unreasonable delay, prepare, execute and deliver to the appropriate coupon. If coupon Bonds are issued pursuant to this paragraph, unless the associated Trustee, and thereupon, upon the presentation and surrender of any Bond or Bonds in temporary Series Resolution provides otherwise, any redemption of Bonds shall only be made upon not form, the Trustee shall authenticate and deliver, in exchange therefor, a Bond or Bonds in more than sixty (60) or less than thirty (30) days’ notice published in Authorized Newspapers, definitive form for the same aggregate principal amount as the Bond or Bonds in temporary form which notice shall contain the information set forth in Section 4.02 hereof. surrendered. Such exchange shall be made by the Authority at its own expense and without making any charge therefor. Until such Bond or Bonds in definitive form are ready for delivery,

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the Registered Owner of one or more Bonds in temporary form may, without the consent of the notice, shall not affect the validity of redemption proceedings taken with respect to Registered Authority, exchange the same, upon surrender thereof to the Trustee for cancellation, for one or Owners to whom proper notice was mailed. Such notice shall specify, unless a pertinent Series more Bonds in temporary form of like aggregate principal amount, in authorized denominations. Resolution shall otherwise provide, the maturities and, if less than all then Outstanding Bonds are to be redeemed or tendered, the numbers, including CUSIP numbers if applicable, of the SECTION 3.10. Book-Entry-Only System of Registration. The Authority may Bonds to be redeemed, which may, if appropriate, be expressed in designated blocks of numbers. provide in any Series Resolution for the issuance of one or more Series of Bonds pursuant to a Such notice shall also state the date fixed for redemption, that on such date the Bonds called for book-entry-only system of registration and transfer and any Authorized Officer is hereby redemption will be due and become payable at the Principal Office of the Trustee, or at the authorized to execute and deliver any representation letter to the securities depository appointed Principal Office of the Paying Agent (if any) mentioned in the Bond called for redemption, and for such book-entry-only registration system approved in the Series Resolution. that from and after such date, interest thereon shall cease to accrue; provided, however,thatthe Holders of all Bonds to be redeemed may file written waivers of notice with the Trustee, and if SECTION 3.11. Payments on Holidays and Weekends. Whenever the due date so waived, such Bonds may be redeemed and all rights and liabilities of said Holders shall for payment of interest, redemption price or principal of the Bonds or the date fixed for mature and accrue on the date set for such redemption, without the requirement of written notice. redemption of any Bond shall be a Saturday, a Sunday, a legal holiday or a day on which banking institutions in the State are authorized or required by law or executive order to close, The Notice to Registered Owners of Bonds shall be deposited by the Trustee in the then payment of such interest, redemption price or principal need not be made on such date, but United States mail, postage prepaid, not more than sixty (60) and not less than thirty (30) days may be made on the next succeeding day which is not a Saturday, a Sunday, a legal holiday or a prior to the redemption date, addressed to the Registered Owners of Bonds called for redemption day on which banking institutions in the State are authorized or required by law or executive at their addresses appearing upon the Bond Register. order to close, with the same force and effect as if made on the due date for payment of principal, interest or redemption price and no interest shall accrue thereon for any period beginning on such When notice of redemption is mailed to the Registered Owners, the Trustee shall mail a day and ending on the payment date. similar notice to The Bond Buyer, but failure to mail any such notice or defect in the mailed notice or in the mailing thereof shall not affect the validity of the redemption notice.

ARTICLE IV The notices required to be given by this Section shall state that no representation is made REDEMPTION OF BONDS as to correctness or accuracy of the CUSIP numbers listed in such notice or stated on the Bonds.

SECTION 4.01. General Provisions for Redemption. Bonds issued hereunder If at the time of the mailing or publication of notice of redemption the Authority shall not shall be subject to redemption at such time, times and from time to time, in such order, at such have deposited with the Trustee or the Paying Agent, as applicable, moneys sufficient to redeem redemption prices, upon such notice, unless waived, and upon such terms and conditions as may all the Bonds called for redemption, such notice shall state that it is conditional and subject to the be expressed in the particular Bonds, in this Resolution or in the pertinent Series Resolution. deposit of the redemption moneys with the Trustee or the Paying Agent, as applicable, not later Whenever Bonds to be redeemed are required to be selected by lot, the Trustee shall be than the opening of business on the redemption date, and such notice shall be of no effect unless authorized to draw by lot the numbers of the Bonds to be redeemed in any manner deemed such moneys are so deposited. reasonable by the Trustee. In the case of a Bond of a denomination greater than $5,000, the Trustee shall treat each such Bond as representing such number of separate Bonds, each of the The Authority may modify in a Series Resolution the notice requirements for redemption denomination of $5,000, as is obtained by dividing the actual principal amount of such Bond by of the Bonds authorized by such Series Resolution in order to conform to the requirements of $5,000. On the redemption of a portion of the principal amount of such Bonds, the Trustee shall The Depository Trust Company or any other applicable securities depository for a Series of authenticate and cause to be delivered, on the surrender of such Bond, a new Bond or Bonds, of Bonds. any authorized denomination, as requested by the Holder, in aggregate principal amount, having a maturity date and bearing interest at a rate equal to and in exchange for the unredeemed portion SECTION 4.03. Payment of Bonds Called for Redemption. Notice having been of the principal of the Bond so surrendered. Such exchange shall be without charge to the given in the manner provided in Section 4.02 hereof, the Bonds or portions thereof so called for Bondholder. redemption shall become due and payable on the redemption date so designated at the Redemption Price, plus interest accrued and unpaid to the redemption date, and, upon SECTION 4.02. Notice of Redemption. When the Authority shall determine to presentation and surrender thereof at any place specified in such notice, such Bonds, or portions redeem Bonds, it shall give written determination to the Trustee at least sixty (60) days prior to thereof, shall be paid at the Redemption Price, plus interest accrued and unpaid to the redemption the date fixed for redemption; and the Trustee shall, thereafter, cause a notice of redemption to date. If, on the redemption date, moneys for the redemption of all the Bonds or portions thereof be mailed to the Registered Owners of Bonds. Notices properly mailed in accordance with the to be redeemed, together with interest to the redemption date, shall be held by the Trustee or provisions hereof and of the Bonds shall be considered received by the addressee for all purposes Paying Agent and be available therefor on said date and if notice of redemption shall have been hereof and thereof. Any failure to mail a notice to a Registered Owner, or any defect in such published as aforesaid, then, from and after the redemption date interest on the Bonds or portions

-37- B-11 -38- thereof of such Series and maturity so called for redemption shall cease to accrue and become payable, whether or not the affected Bonds are presented for payment. If said moneys shall not (e) Rehabilitation and Repair Fund, and within this Fund a separate account be available on the redemption date, such Bonds or portions thereof shall continue to bear for each Operating Division of the Authority and within each account a subaccount for each interest until paid, at the same rate as they would have borne had they not been called for Pledged Project; and redemption. (f) Subordinated Debt Fund;

ARTICLE V (g) State Payment Fund; REVENUES, THEIR APPLICATION AND CERTAIN FUNDS (h) General Reserve Fund; and SECTION 5.01. Pledge of Revenues and Other Moneys. Subject only to the rights of the Authority to apply amounts for Operating Expenses of Pledged Projects under the (i) Rebate Fund; and provisions hereof, the Revenues, all Scheduled Counterparty Payments and all moneys, securities and funds held or set aside or to be held or set aside pursuant to this Resolution by any Fiduciary (j) Airport Revenue Fund. or in any Fund or Account created by the Resolution (except as otherwise herein provided in respect of the Rebate Fund and other than the Airport Revenue Fund) are hereby pledged and a SECTION 5.03. Establishment of Other Accounts and Other Funds. The security interest is therein granted, to secure the payment of the principal or Redemption Price of Trustee shall establish such additional Accounts within the several Funds as the Authority may and interest on the Bonds and all Qualified Swap Obligations. This pledge shall be valid and direct. The Authority may establish additional Funds and Accounts in a Series Resolution or binding from and after the time of the delivery by the Trustee of the first Bond authenticated and Supplemental Resolution. delivered hereunder. The Net Revenues and other moneys, securities and funds so pledged and then or thereafter received by the Authority shall immediately be subject to the lien of such SECTION 5.04. Construction Fund. pledge without any physical delivery or further act, and the lien of such pledge and the obligation to perform the contractual provisions hereby made shall have priority over any or all other (a) The Trustee shall establish within the Construction Fund a separate obligations and liabilities of the Authority, and the lien of such pledge shall be valid and binding account for each Project. The Trustee shall credit to such separate account for each Project any as against all parties having claims of any kind in tort, contract or otherwise against the moneys paid into the Construction Fund constituting (1) proceeds of sale of Bonds for such Authority irrespective of whether such parties have notice thereof. Project, (2) any proceeds of insurance (other than business interruption or use and occupancy insurance) and of contractors’ surety bonds received by the Authority in connection with a The pledge and lien created hereby may be modified by a Series Resolution or Project, (3) any amount accompanied upon its payment into the Construction Fund by an Supplemental Resolution to provide for a pledge of amounts on deposit in particular Funds or Officer’s Certificate directing its credit to such separate account for a particular Project. Accounts to a particular Series of Bonds, which amounts constitute proceeds of such Series of Bonds deposited in such Funds or Accounts, superior to the pledge of such Funds and Accounts (b) Upon requisitions from time to time filed with the Trustee and signed by to other Bonds; provided, however, that no such superior pledge can be established for amounts an Authorized Officer stating, by general classification and by reference to a Project, the purpose on deposit in the Revenue Fund, the Debt Service Reserve Fund insofar as it relates to Bonds for which each disbursement is to be made, and, if such disbursement is for the purpose of bearing a fixed rate of interest, or the Rehabilitation and Repair Fund. The Series Resolution or paying the purchase price or cost of any lands, easements, or rights or interests in or relating to Supplemental Resolution may provide that such proceeds shall be held by a Fiduciary. lands or paying the cost or expense of work, materials, supplies or equipment, accompanied by a Consulting Engineer’s Certificate stating that such lands, easements, rights or interests are SECTION 5.02. Establishment of Funds and Certain Accounts. The following necessary for the construction or reconstruction or proper operation and maintenance of such Funds are hereby established for purposes of this Resolution: Project or that such work was actually performed, or such materials, supplies or equipment actually delivered, installed or fabricated, in, about or for the construction or reconstruction of (a) Construction Fund; such Project, the Trustee, out of the separate account in the Construction Fund established for such Project shall make such disbursements as may be certified by such Authorized Officer as (b) Revenue Fund, and within this Fund a separate operating account for each required in order to pay Costs of construction or any other Costs with respect to such Project. In Operating Division of the Authority, if requested in writing by the Authority; making any such disbursement, the Trustee shall be fully protected in acting upon such certification of the Authorized Officer and, in the case of payments with respect to any (c) Debt Service Fund; indebtedness of the Authority or any other case, shall not be required to verify or take any other or further action respecting the application of any proceeds of such indebtedness or of any other (d) Debt Service Reserve Fund; moneys.

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manually executed copy to be furnished promptly), transfer from time to time moneys on deposit (c) If at any time there shall have been filed by the Authority with the Trustee in the Revenue Fund and the General Reserve Fund to an account or accounts established with a certificate executed by an Authorized Officer stating that construction or reconstruction of a any bank or trust company meeting the qualifications set forth herein for service as a Paying Project has been substantially completed or that said Project has been abandoned, accompanied Agent hereunder for the purpose of paying the Operating Expenses of Pledged Projects (as to by a Consulting Engineer’s Certificate stating that an amount set forth in said Consulting moneys from the Revenue Fund) and General Projects (as to moneys from General Reserve Engineer’s Certificate reserved in the account established in the Construction Fund for such Fund). The Authority shall draw upon any such account only for purposes and in amounts Project will be sufficient, with respect to such Project, to pay all anticipated Costs thereof, any authorized by the Act, its then-current Annual Budget and hereby. All such accounts shall be in moneys in said account in excess of the amount so set forth in said Consulting Engineer’s the joint names of the Authority and the Trustee, but the Trustee shall not be required to approve Certificate shall be transferred from said account by the Trustee and be paid by the Trustee into or execute or co-execute any checks or drafts drawn thereon. and credited to such other account or accounts established in the Construction Fund as may be specified in said Officer’s Certificate or, if no other account shall be so specified (1) the Debt (c) (i) All Airport Revenues shall be collected by the Authority and Service Reserve Fund if such Fund shall be below the Debt Service Reserve Requirement, and deposited daily, as far as practicable, in the name of the Trustee, with a depositary or depositaries (2) the Rehabilitation and Repair Fund, to the extent of any remaining balance of such moneys. designated by the Authority, such designation to be supplied to the Trustee, together with a Any such transfer to the Rehabilitation and Repair Fund, if such moneys represent proceeds of statement by the Authority that each such depositary meets the qualifications prescribed herein Tax Exempt Obligations, shall be expended within six months of such transfer. for the appointment of Paying Agents, each such depositary to receive such moneys as custodian thereof for the Trustee. Statements showing the amount of each such deposit and the name of the (d) No amount shall be withdrawn from or paid out of the Construction Fund depositary shall be forwarded promptly to the Trustee by the Authority and by such depositary. except as expressly provided in this Section. All moneys in the Construction Fund are hereby The Trustee shall be accountable under this Section 5.05(c) only for moneys actually so pledged, pending their application to other purposes or disbursement or transfer to other Funds as deposited with it. All such moneys shall be credited to the Airport Revenue Fund. The Trustee hereinabove in this Section provided, to secure the payment of the principal or Redemption Price shall, on receipt of written instructions signed by an Authorized Officer (which may be of and interest on the Bonds. transmitted by facsimile machine with a manually executed copy to be furnished promptly), transfer from time to time moneys on deposit in the Airport Revenue Fund to an account or However, if a condition of a Government Grant or Government Loan is that it not be accounts (which may, but need not be, the same account or accounts maintained pursuant to subject to claims of other Authority creditors, such moneys may be deposited in an Account Section 5.05(b), so long as Airport Revenues deposited in said account or accounts can be established in the Construction Fund free of the pledge and security interest created by this accounted for separately as Airport Revenues) established with any bank or trust company Resolution. meeting the qualifications set forth herein for service as a Paying Agent hereunder for the purpose of paying the Airport Costs and Expenses. The Authority shall draw upon any such SECTION 5.05. Deposits into Revenue Fund and Airport Revenue Fund. account only for purposes and in amounts authorized by the Act, its then-current Annual Budget and hereby. Any such accounts which may be established solely for Airport Revenues shall be (a) All Revenues and Scheduled Counterparty Payments shall be collected by in the name of the Authority. the Authority and deposited daily, as far as practicable, in the name of the Trustee, with a depositary or depositaries designated by the Authority, such designation to be supplied to the (ii) Without limiting the generality of clause (i) of this Section 5.05(c), Trustee, together with a statement by the Authority that each such depositary meets the the Trustee, within the first ten (10) days of each calendar month in each Fiscal Year, shall qualifications prescribed herein for the appointment of Paying Agents, each such depositary to withdraw from the Airport Revenue Fund (to the extent funds are then available in the Airport receive such moneys as custodian thereof for the Trustee. Statements showing the amount of Revenue Fund for such purposes) and deposit into a special subaccount to be established within each such deposit and the name of the depositary shall be forwarded promptly to the Trustee by the Debt Service Account and to be designated as the Airport Bonds Subaccount an amount the Authority and by such depositary. The Trustee shall be accountable under this equal to the amount (if any) needed to increase the amount in the Airport Bonds Subaccount Section 5.05(a) only for moneys actually so deposited with it. All such moneys shall be credited (including the amount in any Sinking Fund Account established therein) so that it equals a pro to the appropriate divisional operating account in the Revenue Fund. Unless otherwise directed rata portion of the Debt Service Requirement on any Airport Bonds then Outstanding, if any, in or permitted by any other provision of this Resolution, any moneys, other than the foregoing, respect of the next Payment Date. received by the Authority from any other source for operating, maintaining or repairing the Transportation System (other than Airport Revenues) shall also be paid over to the Trustee and SECTION 5.06. Periodic Withdrawals from Revenue Fund. The Trustee, within shall be deposited by it into and credited by it to the Revenue Fund. the first ten (10) days of each calendar month in each Fiscal Year, after retaining in the Revenue Fund an amount equal to 15% of the annual Operating Expenses of each Authority Operating (b) So long as no Event of Default shall have occurred and be continuing Division or Project (except for Operating Expenses of General Projects and Special Projects), as hereunder, or as otherwise provided herein, the Trustee shall, on receipt of written instructions reflected in the then-current Annual Budget of the Authority (which moneys shall be applied signed by an Authorized Officer (which may be transmitted by facsimile machine with a from time to time as needed to meet the operating cash flow needs of the Authority), shall, out of

-41- B-12 -42- the remaining moneys in the Revenue Fund, make payments into the following Funds in the (a) the unpaid interest due on the Bonds on such Interest Payment Date, and following order of priority, but as to each Fund only within the limitations hereinbelow indicated shall cause the same to be applied to the payment of said interest when due and may transmit the with respect thereto and only after maximum payment within such limitation into every such same to Paying Agents who shall apply the same to such payment; and Fund previously mentioned in the following listing: (b) the Principal Installment due on such date and shall cause the same to be First: Into the Debt Service Fund, to the extent (if any) needed to increase the applied to the payment of the principal or Redemption Price of said Bonds when due and may amount in the Debt Service Fund (including the amount in any Sinking Fund Account transmit the same to Paying Agents who shall apply the same to such payment. The Trustee established therein) so that it equals the sum of (i) a pro rata portion of the Debt Service shall also pay out of the Debt Service Fund the accrued interest included in the purchase price of Requirements for the Bonds in respect of the next Payment Date for the Bonds, and (ii) any Debt Bonds purchased for retirement. Service on Qualified Swap Obligations due and owing by the Authority on the next Payment Date. On or prior to each Payment Date for each Qualified Swap Agreement, the Trustee shall withdraw from the Debt Service Fund and pay to the Qualified Swap Provider of such Qualified Second: Into the Debt Service Reserve Fund, (i) to the extent (if any) needed to Swap Agreement an amount equal to any and all Qualified Swap Obligations due and payable by increase the amount in the Debt Service Reserve Fund so that over the course of six (6) calendar the Authority on such Payment Date in accordance with the terms of such Qualified Swap months after any draw thereon, it equals the Debt Service Reserve Requirement, through equal Agreement. monthly repayments; and (ii) after any valuation of the Debt Service Reserve Fund, to the extent (if any) necessary to increase the amount in the Debt Service Reserve Fund so that it equals the Prior to the 45th day preceding the due date of each Sinking Fund Installment, any Debt Service Reserve Requirement. Any prepayments of amounts required under clause (i) this amounts then on deposit in the Debt Service Fund (exclusive of amounts, if any, set aside in said Section shall be credited to the remaining installment requirements in reverse order. In lieu of Fund which were deposited therein from the proceeds of Bonds) shall, if so directed in writing the deposits required under clause (i) this Section, amounts shall be payable as required pursuant by an Authorized Officer, be applied by the Trustee to the purchase of Bonds of the Series and to the reimbursement agreement associated with any Credit Facility or surety policy at the time maturity for which such Sinking Fund Installment was established in an amount not exceeding being employed to satisfy the Debt Service Reserve Requirement, in order to reinstate the same that necessary to complete the payment of the unsatisfied balance of such Sinking Fund to an amount equal to the Debt Service Reserve Requirement within the aforesaid six- (6-) month Installment. All purchases of any Bonds pursuant to this subsection (c) shall be made at prices period. not exceeding the applicable sinking fund Redemption Price of such Bonds plus accrued interest.

Third: Into the Accounts in the Rehabilitation and Repair Fund, to the extent (if The applicable sinking fund Redemption Price of any Bonds so purchased or redeemed, any) needed to increase the amounts in the various Operating Division Accounts in the plus any interest which would otherwise be due and payable on such Bonds, shall be deemed to Rehabilitation and Repair Fund so that each equals a pro rata portion of the Rehabilitation and constitute part of the Debt Service Fund until such Sinking Fund Installment date, for the Repair Requirement for the then-current Fiscal Year for each Authority Operating Division. purpose of calculating the amount of such Fund.

Fourth: Into the Subordinated Debt Fund, to the extent (if any) needed to As soon as practicable after the 45th day preceding the due date of any such Sinking increase the amount in the Subordinated Debt Fund so that it equals a pro rata portion of Fund Installment, the Trustee shall proceed to call for redemption, by giving notice as provided Subordinated Debt Obligations (other than Subordinated Debt Obligations to be paid from in Section 4.02, on such due date Bonds of the Series and maturity for which such Sinking Fund sources other than Revenues) coming due on the next payment date for each issue of Installment was established in such amount as shall be necessary to complete the payment of the Subordinated Indebtedness then outstanding, as such amount is certified to the Trustee in a unsatisfied balance of such Sinking Fund Installment. certificate signed by an Authorized Officer. The Trustee shall pay out of the Debt Service Fund to the appropriate Paying Agents, on Fifth: Into the State Payment Fund, to the extent (if any) needed to increase the or before such redemption date, the amount required for the redemption of the Bonds so called amount therein to equal a pro rata portion of the State Payment for the then-current Fiscal Year. for redemption, and such amount shall be applied by such Paying Agents to such redemption. All expenses in connection with the purchase or redemption of Bonds shall be paid by the Sixth: Into the General Reserve Fund, any remaining balance of moneys Authority and shall constitute Operating Expenses. withdrawn from the Revenue Fund pursuant to the terms of this Section 5.06. If by reason of open-market purchases, at prices below the stated Redemption Price, of SECTION 5.07. Application and Restoration of Debt Service Fund. The Trustee Bonds subject to redemption by operation of a sinking fund account, the Debt Service Fund shall shall withdraw from the Debt Service Fund prior, but not sooner than two (2) Business Days contain excess moneys after a Payment Date, such excess may be held in the Fund as a credit prior, to each Payment Date of any Bonds, an amount equal to: against the succeeding Sinking Fund Installment or returned to the Revenue Fund, as the Authority shall direct.

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difference, if any, between the Debt Service Reserve Requirement and the amount of the Debt Amounts deposited in the Debt Service Fund constituting capitalized interest on any Reserve Policy, shall be transferred from the Debt Service Reserve Fund to the Revenue Fund. Series of Bonds shall be held aside in a separate Account and be applied to the payment of interest on such Series (or on Bonds issued to refund such Series) as the same is due and payable. Any Debt Reserve Policy shall be issued by an institution having credit ratings at least equal to, and given by the same Rating Agencies as, the credit ratings on any Series of Bonds On a refunding of any Bonds, the Trustee shall, if the Authority so directs, withdraw from secured by the Debt Service Reserve Fund. the Debt Service Fund all, or any portion of, the amounts accumulated therein with respect to Debt Service on the Bonds being refunded and deposit such amounts in escrow to be held for the If a draw or disbursement is made under a Debt Reserve Policy pursuant to this Section, payment of the principal or Redemption Price, if applicable, and interest on the Bonds being the Authority shall be obligated either (1) to reinstate the maximum limits of such Debt Reserve refunded; provided that such withdrawal shall not be made unless (1) immediately thereafter Policy, or (2) to deposit into the Debt Service Reserve Fund, funds in the amount of the Bonds being refunded shall be deemed to have been paid pursuant to subsection (b) of disbursement made under such Debt Reserve Policy, or a combination of such alternatives, as Section 12.01, and (2) the amount remaining in the Debt Service Fund, after giving effect to the shall provide that the amount in the Debt Service Reserve Fund equals the Debt Service Reserve issuance of Refunding Bonds and the disposition of the proceeds thereof, shall not be less than Requirement within a time period not longer than would be required to restore the Debt Service the Debt Service Requirements. Reserve Fund by operation of clause Second of Section 5.06 hereof and from the same source of funds as provided in Section 5.06. SECTION 5.08. Application of Debt Service Reserve Fund. The contractual arrangements with respect to a Debt Reserve Policy shall not limit the (a) If on any Payment Date there shall not be a sufficient amount in the Debt Authority’s right to cancel such Debt Reserve Policy upon not less than 180 days’ written notice Service Fund to provide for any withdrawal therefrom required under the provisions of the first by the Authority upon a reduction or suspension of any of the credit ratings with respect to such paragraph of the immediately preceding Section 5.07, the Trustee shall withdraw from the Debt Debt Reserve Policy (or the provider thereof) required by this Section 5.08, or such Debt Service Reserve Fund and pay into the Debt Service Fund an amount sufficient to make up such Reserve Policy shall provide by its terms that it terminates on any such downgrade or deficiency. suspension. Upon the occurrence of any such reduction or suspension, the Authority shall so notify the provider of the Debt Reserve Policy and prior to the effective date of such cancellation (b) Whenever the moneys on deposit in the Debt Service Reserve Fund shall shall either provide a substitute Debt Reserve Policy meeting the requirements of this exceed the Debt Service Reserve Requirement, the Trustee, at the direction of an Authorized Section 5.08 or shall deposit cash in the Debt Service Reserve Fund so that the amount in such Officer, shall withdraw the amount of such excess and, except as provided in Paragraph (c) of Fund shall equal the Debt Service Reserve Requirement. this Section 5.08, deposit such amount in the Revenue Fund. A Debt Reserve Policy may have a stated expiration date (the “Policy Expiration Date”) (c) Whenever the moneys in the Debt Service Reserve Fund, together with the that is earlier than the final maturity of the Bonds, provided that, simultaneously with the amount in the Debt Service Fund, are sufficient to pay all Outstanding Bonds in accordance with delivery of the Debt Reserve Policy for deposit to the Debt Service Reserve Fund, the Authority their terms and all Qualified Swap Obligations owed by the Authority under all Qualified Swap shall also cause to be deposited in the Debt Service Reserve Fund (the “Supplemental Deposit”) Agreements, the funds on deposit in the Debt Service Reserve Fund shall be transferred to the non-callable, non-refundable Investment Securities, maturing not later than the Policy Expiration Debt Service Fund. Date, the principal of and interest on which when due will be in an amount at least equal to the amount of the Debt Reserve Policy. For purposes of paragraphs (a) and (b) of this Section 5.08, (d) Notwithstanding the foregoing provisions, in lieu of the required deposits the Trustee shall not, so long as the Debt Reserve Policy is in effect, take the Supplemental into the Debt Service Reserve Fund, the Authority may cause to be deposited into the Debt Deposit into account in determining the amount on deposit in the Debt Service Reserve Fund. Service Reserve Fund a surety bond, an insurance policy or irrevocable letter of credit (a “Debt Reserve Policy”) payable to the Trustee for the benefit of the Owners of the Bonds or any Series SECTION 5.09. Application of Rehabilitation and Repair Fund. thereof in an amount equal to the difference between the Debt Service Reserve Requirement and the remaining sums, if any, then on deposit in the Debt Service Reserve Fund. Each Debt (a) Amounts in the Accounts of the Rehabilitation and Repair Fund shall be Reserve Policy shall be payable (upon the giving of notice as required thereunder) on any applied to pay the costs of major resurfacing, replacement, repairs, renewals or reconstruction of Payment Date on which moneys shall be required to be withdrawn from the Debt Service each Pledged Project or any part thereof, whether buildings, improvements, fixtures or Reserve Fund and applied to the payment of a Principal Installment of or interest on any Bonds equipment, as determined in writing by the Authority filed with the Trustee and the Authority. and such withdrawal cannot be met by amounts on deposit in the Debt Service Reserve Fund or provided from any other Fund under this Resolution. Upon issuance and delivery of the Debt (b) If amounts held in the Debt Service Fund, Debt Service Reserve Fund, Reserve Policy, all amounts on deposit in the Debt Service Reserve Fund in excess of the State Payment Fund, Subordinated Debt Fund and the General Reserve Fund are insufficient to pay the Debt Service Requirements becoming due on any Payment Date, the Trustee shall

-45- B-13 -46- transfer from the Rehabilitation and Repair Fund to the Debt Service Fund an amount sufficient (2) payments into any separate Account or Accounts established in the to eliminate such deficiency. Construction Fund for application to the purposes of such Account;

SECTION 5.10. Application of Subordinated Debt Fund. (3) improvements, extensions, betterments, renewals, replacements and improvements to any Pledged or General Project or the provision of one or more reserves (a) On each payment date for an issue of Subordinated Indebtedness, the therefor; Trustee shall transfer from the Subordinated Debt Fund to the trustee or holder of such Subordinated Indebtedness named in a certificate signed by an Authorized Officer, in (4) payments into the Revenue Fund; immediately available funds, the amount of the Subordinated Debt Obligations (other than Subordinated Debt Obligations to be paid from sources other than Revenues) due on such (5) to pay any amounts due and owing by the Authority under the terms payment date. of any Exchange Agreement; and

(b) If amounts held in the Debt Service Fund, Debt Service Reserve Fund and (6) any other corporate purpose of the Authority permitted by the Act General Reserve Fund are insufficient to pay the Debt Service Requirements becoming due on and hereby, including without limitation, payments to the State, the Department or the any Payment Date, the Trustee shall transfer from the Subordinated Debt Fund to the Debt Transportation Trust Fund Authority. Service Fund an amount sufficient to eliminate such deficiency. (c) The Authority shall pay to the Trustee for deposit in the General Reserve SECTION 5.11. Application of State Payment Fund. Fund any revenues of Special Projects in excess of the operating expenses, rehabilitation and repair and debt service requirements relating to such Special Projects. (a) Moneys in the State Payment Fund shall be applied to pay the Authority’s State Payment obligations when due. (d) The Authority may at any time enter into one or more Exchange Agreements if the Authority determines that such Exchange Agreements will assist the Authority (b) If amounts held in the Debt Service Fund, Debt Service Reserve Fund, in more effectively managing its interest costs with respect to the Bonds, Subordinated Subordinated Debt Fund and General Reserve Fund are insufficient to pay the Debt Service Indebtedness or any other obligations of the Authority. Any payments required to be made by Requirements becoming due on any Payment Date, the Trustee shall transfer from the State the Authority under any such Exchange Agreement shall be made from the General Reserve Payment Fund to the Debt Service Fund an amount sufficient to eliminate such deficiency. Fund as provided in paragraph (b) of this Section 5.12.

SECTION 5.12. General Reserve Fund. SECTION 5.13. Subordinated Indebtedness. The Authority may, at any time or from time to time, issue evidences of indebtedness payable out of, and which may be secured by (a) The Authority shall transfer from the General Reserve Fund to the various a pledge of, such amounts in the Subordinated Debt Fund or the General Reserve Fund as may Funds, in the direct order of priority specified in Section 5.06 hereof, the amount necessary (or from time to time be available for the purpose thereof, subject to the following: all the moneys in the General Reserve Fund if less than the amount necessary), (1) to make up any deficiencies in payments to said Funds required by Section 5.06 hereof, (2) in the event of (a) Such indebtedness shall be incurred only for one or more of the purposes any transfer of moneys to the Debt Service Fund from the Debt Service Reserve Fund pursuant set forth in Section 5.12(b) hereof or for the payment or refinancing of Subordinated to Section 5.08, the amount of any resulting deficiency in the Debt Service Reserve Fund, and Indebtedness and the proceeds thereof shall only be applied for such purpose or purposes. (3) to the accounts established for the purpose pursuant to Section 5.05 (b), the Operating Expenses of any General Projects as reflected in the then-current Annual Budget of the (b) The Authority shall covenant to provide sufficient moneys to pay all debt Authority. service on the Subordinated Indebtedness when and as due.

(b) Subject to the terms of any pledge securing any Exchange Agreement, (c) The pledge of amounts in the Subordinated Debt Fund and General amounts in the General Reserve Fund not required to meet a deficiency may be applied to any Reserve Fund shall be, and shall be expressed to be, subordinate in all respects to the provisions one or more of the following purposes: of this Resolution and the lien and pledge created by this Resolution in favor of the Bonds and the Qualified Swap Agreements. (1) the purchase or redemption of any Bonds on market-rate terms and expenses of any such purchase or redemption; (d) All Principal Installments and interest on the Bonds and all Qualified Swap Obligations must be paid before any further payment of principal or interest on Subordinated Indebtedness, if any of the following events occur:

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such 45-day period shall cause to be delivered to the Trustee an opinion of the financial (i) an Event of Default under this Resolution resulting from the non- consultant concerning its conclusions with respect to the amount of such Rebatable Arbitrage payment of Principal Installments or interest on the Bonds (until cured). together with a written summary of the calculations relating thereto. Such opinion shall also be accompanied by funds of the Authority or instructions to transfer funds from the Revenue Fund (ii) an Event of Default under this Resolution with respect to any one or (but only after required transfers to the Debt Service Fund and the Debt Service Reserve Fund) more Series of Bonds resulting in acceleration of Principal Installments and interest sufficient and available for the purpose to increase the amount in the Rebate Fund to the amount thereon. of Rebatable Arbitrage set forth in the opinion.

(iii) the Authority becomes insolvent. (e) At the written direction of the Authority, the Trustee shall withdraw from the Rebate Fund and pay over to the United States of America the Rebatable Arbitrage with (e) Any Event of Default with respect to Subordinated Indebtedness shall not respect to each Series of Bonds in installments as follows: The first payment shall be made not in itself create the right to declare an Event of Default under this Resolution. The governing later than 60 days after the end of the fifth Bond Year. Each subsequent payment shall be made instruments for any Subordinated Indebtedness shall provide that the Subordinated Indebtedness not later than 60 days after each succeeding fifth Bond Year. Each installment shall be in an may not be accelerated unless the Bonds are accelerated. amount set forth in a written direction of the Authority which, when added to all previous rebate payments, is equal to at least ninety percent (90%) of the sum of the amount of Rebatable (f) No Subordinated Indebtedness may be issued unless the Authority has first Arbitrage plus all previous rebate payments with respect to the applicable Series of Bonds as of determined by certified resolution that the issuance of such Subordinated Indebtedness will not the close of the period ending on the most recent Computation Date (determined in accordance impair the financial viability of the Authority and its operations. with the opinion of the financial consultant and accompanying written summary given to the Trustee by the Authority concerning Rebatable Arbitrage with respect to the Bonds for the period SECTION 5.14. Rebate Fund; Periodic Rebate Computation; Payment of ending as of the close of such Computation Date). Not later than 60 days after the retirement of Rebate. the last obligation of each Series of Bonds, the Authority shall direct the Trustee in writing to pay to the United States of America one hundred percent (100%) of the Rebatable Arbitrage with (a) The Trustee shall establish and thereafter hold and maintain until all of the respect to such Bonds. Bonds have been retired, and for sixty (60) days thereafter, a Rebate Fund for the purpose of paying to the United States Treasury the Rebatable Arbitrage* or the penalty amount in lieu of (f) In the event the Authority has elected to pay a penalty in lieu of rebate rebate (“Penalty Amount”) and, if elected, any amount required to terminate such penalty, which applicable to any portion of a Series of Bonds, within 75 days subsequent to the close of each Rebate Fund shall be held by the Trustee separate and apart from all other funds and accounts 6-month period after the date the Bonds are issued, the Authority shall pay to the Trustee for established hereunder and from all other moneys of the Trustee. All amounts in the Rebate deposit in a separate account of the Rebate Fund established for the receipt of Penalty Amounts, Fund, including income earned from investment of amounts in the Rebate Fund, shall be held by the amount required to be paid, if any, for the most recent 6-month period pursuant to Section the Trustee free and clear of the lien of this Resolution. 148(f)(4)(C)(vii) of the Code, and, if elected, any amount required to terminate such penalty pursuant to Section 148(f)(4)(C)(viii). Such payment shall be accompanied by a calculation (b) The Authority covenants for the benefit of the Holders of the Bonds that it supporting the determination of the Penalty Amount for such 6-month period. In the event the will comply with the requirements of Section 148(f) of the Code in connection with any amounts Authority has determined that no Penalty Amount is due for any 6-month period, the Authority subject to rebate in accordance with Section 148(f) of the Code. shall provide to the Trustee, within 75 days subsequent to the close of such period, calculations supporting such conclusion of the Authority. (c) Any moneys in the Rebate Fund shall be invested exclusively in Federal Securities. The Trustee shall maintain records of the date and amount of each deposit made into (g) The Authority shall direct the Trustee to pay the Penalty Amount the Rebate Fund and of the investments made of such amounts; provided that the Trustee may applicable to the United States of America not later than 90 days subsequent to the end of such commingle the amounts deposited into the Rebate Fund and shall not be required to segregate 6-month period, or, in the case of an election to terminate the 1½ percent penalty not later than such deposits. the date which is ninety (90) days after the earlier of the end of the initial temporary period or the date an election is made to terminate the 1½ percent penalty before the end of the initial (d) Within 45 days of each Computation Date, the Authority shall retain a temporary period. financial consultant to compute the Rebatable Arbitrage with respect to the Bonds, and within (h) Payments made to the United States of America by the Trustee of Rebatable Arbitrage or Penalty Amounts with respect to the Bonds shall be filed with the * All defined terms used in this Section 5.14 and not otherwise defined herein shall have the meanings ascribed Internal Revenue Service Center, Philadelphia, Pennsylvania 19255, or such other Internal thereto in Section 148 of the Code. Revenue Service office authorized to receive payments of Rebatable Arbitrage or Penalty

-49- B-14 -50- Amounts, as directed by the Authority. All payments of Rebatable Arbitrage or Penalty Reserve Fund relates, such earnings on the Debt Service Reserve Fund shall be transferred to the Amounts shall be accompanied by Form 8038-T or such other form prescribed by the Internal Construction Fund, unless otherwise provided in a Series Resolution. Earnings on the Revenue Service completed by or on behalf of the Authority to accompany payments of Construction Fund shall remain therein until the Project to which such earnings relate has been Rebatable Arbitrage or Penalty Amounts, together with any other information which the substantially completed as provided in Section 5.04(c), and then transferred as provided in that Authority instructs the Trustee to accompany such payments. Section, unless otherwise provided in a Series Resolution.

(i) The Trustee shall retain records of the determinations of the amounts required to be deposited in the Rebate Fund, of the proceeds of any investment of moneys in the ARTICLE VI Rebate Fund, and of the amounts paid to the United States of America, until the date six (6) years DEPOSITARIES, SECURITY FOR DEPOSITS AND after all of the Bonds have been retired. INVESTMENT OF FUNDS

(j) The provisions of this Section 5.14 are intended to comply with Section SECTION 6.01. Depositaries. All moneys held by the Trustee under the 148 of the Code and if, as a result of a change in such Section of the Code or in the interpretation provisions of this Resolution shall be deposited with the Trustee or with one or more thereof, a change in this Section 5.14 shall be permitted or necessary to assure continued Depositaries in trust for the Trustee. All moneys held by the Authority under this Resolution compliance with Section 148 of the Code, then the Authority shall be empowered to amend this shall be deposited in one or more Depositaries in trust for the account of the Trustee, until Section 5.14, without the consent of the Bondholders, to the extent permitted, necessary or disbursed as herein permitted. All moneys deposited under the provisions of this Resolution desirable to comply with the provisions of Section 148 of the Code; provided, however,thatthe with the Trustee or any Depositary shall be held in trust and applied only in accordance with the Authority or the Trustee shall require, prior to the effectiveness of any such amendment, an provisions of this Resolution, and each of the Funds and Accounts established by this Resolution opinion of Bond Counsel, at the sole cost and expense of the Authority, to the effect that either shall be a trust fund. (i) such amendment is required to maintain the exclusion from gross income under Section 103 of the Code of interest paid or payable on the Bonds, or (ii) such amendment shall not adversely SECTION 6.02 Deposits; Security Therefor. affect the exclusion from gross income under Section 103 of the Code of interest paid or payable on the Bonds. (a) All moneys held by any Depositary under this Resolution may be placed on demand or time deposit, as directed by the Authority, provided that such deposits shall permit (k) Notwithstanding anything to the contrary contained in this Resolution, the the moneys so held to be available for use when needed. Any such deposit may be made in the obligation of the Authority and the Trustee under this Section 5.14 shall survive the retirement of commercial banking department of any Fiduciary, which may honor checks and drafts on such all of the Bonds and the discharge and release of the Resolution otherwise effected pursuant to deposit as if such institution were not also acting as a Fiduciary hereunder. All moneys held by Article XII hereof. any Fiduciary may be deposited in its commercial banking department. Unless otherwise directed by the Authority, such Fiduciary shall allow and credit on such moneys such interest, if (l) The Trustee shall maintain records of the investment of all Funds and any, as it customarily allows upon similar funds of similar amounts, provided that such moneys Accounts hereunder. Such records shall specify the Account or Fund to which each investment on deposit be available for use when needed. (or portion thereof) held by the Trustee is to be allocated and shall set forth, in the case of each investment, (1) the purchase price of the investment, including accrued interest, (2) identifying (b) All moneys held under this Resolution by the Trustee, or any other information including the par amount, coupon rate, and payment dates, (3) the amount received Fiduciary or any Depositary shall be insured by the Federal Deposit Insurance Corporation and at maturity or sale price, including accrued interest, (4) the amounts and dates of any payments to the extent not so insured, shall be continuously and fully secured for the benefit of the made with respect to the investment, and (5) the dates of acquisition and disposition or maturity. Authority and the Owners of the Bonds, either (i) by lodging with the Trustee as collateral security, Federal Securities having a market value not less than the amount of such moneys, or (m) The Trustee shall have no responsibility for the computation of amounts (ii) in such other manner as may then be required by applicable federal or State laws and required to be rebated to the United States or the verification of amounts required to be rebated regulations to provide security for the deposit of public funds or to grant a preference to the to the United States calculated by or on behalf of the Authority. depositor thereof.

SECTION 5.15. Earnings on Funds. Earnings on the Rebate and General Reserve However, it shall not be necessary for the Fiduciaries or Depositaries to give security Funds shall remain in such Funds until applied in accordance with the provisions hereof. under this subsection (b) if and to the extent such deposits and/or Fiduciaries or Depositaries Earnings on the Debt Service, Debt Service Reserve, Rehabilitation and Repair, Subordinated meet the applicable requirements set forth in subparagraphs (iv) or (v) of the definition of Debt Fund and State Payment Funds, shall, if such Funds are at their Requirements, be Investment Securities, or such moneys are on deposit with the New Jersey Cash Management transferred from time to time to the Revenue Fund; provided, however, that during the period of Fund or are entitled to the benefits of the New Jersey Governmental Unit Deposit Protection Act. construction of a Project funded with proceeds of a Series of Bonds to which the Debt Service

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SECTION 6.03. Investment of Funds. All investments shall be made at the direction of the Authority (which direction shall be made in writing or, if orally, with subsequent If more than one provision of the foregoing shall apply at any time to any particular written confirmation), in Investment Securities, and shall mature or be subject to repurchase, investment, the value thereof at such time shall be determined in accordance with the provision withdrawal without penalty or redemption at the option of the holder on or before the dates the establishing the lowest value for such investment. invested amounts are reasonably expected to be needed for purposes for which the Funds and Accounts containing them are established hereunder. Investments of moneys in the Construction SECTION 6.05. Liquidation of Investments. Except as may otherwise be Fund shall mature or be subject to repurchase, withdrawal without penalty or redemption at the provided in this Resolution, the Trustee shall sell at the best price obtainable, or present for option of the holder on or before the dates set forth in an estimated expenditure schedule to be redemption, any Investment Security held by it in any Fund or Account, whenever necessary if filed with the Trustee by the Authority at the time of funding the Construction Fund for the needed to provide moneys to meet any payment or transfer requirement relating to such Fund or Projects to be acquired or constructed. Such schedule shall be revised at least annually by the Account. The Trustee nor the Authority shall be liable for any depreciation in the value of the Authority until completion of such Projects. Investment Securities (but the Authority shall be responsible for restoring any Fund to its Requirement, as occasioned by any such depreciation, in the manner prescribed herein), or any SECTION 6.04. Valuation of Funds. In computing the assets of any Fund or losses incurred upon any authorized disposition thereof. Account, investments and accrued interest thereon shall be deemed a part thereof. Such investments shall be valued, no less often than semi annually, and shall be valued at the SECTION 6.06. Changes in Ratings on Investments; Qualified Swap amortized cost of such obligations; provided, however, that (a) such investments shall also be Agreements and Exchange Agreements; Credit and Liquidity Facilities. valued at market, at such times and in such manner as provided in any applicable Tax Regulatory Agreement or similar certificate or instrument executed in connection with the issuance of any (a) Whenever the Authority receives notice that the rating assigned by a Bonds then Outstanding and as specified in writing by the Authority to the Trustee, and (b) in the Rating Agency to an Investment Security has been withdrawn or lowered to a category below the case a valuation of the investments in the Debt Service Reserve Fund during any period (i) minimum rating established in the definition of the term “Investment Securities”, the Authority, following a withdrawal therefrom to pay Debt Service on the Bonds and prior to the restoration to the extent practicable and feasible, will (i) direct the Trustee to liquidate such Investment of the amount on deposit therein to the Debt Service Reserve Requirement, or (ii) when the Security and reinvest in an acceptable Investment Security; or (ii) will seek to obtain collateral weighted average term to maturity or redemption upon the demand of the holder of the for the Investment security sufficient to satisfy requirements for the minimum rating established Investment Securities contained in the Debt Service Reserve Fund exceeds ten (10) years, such for that type of Investment Security. investments shall be valued at current market value. As used herein the term “amortized cost”, when used with respect to an obligation purchased at a premium above or a discount below par, (b) Whenever the Authority desires to enter into a Qualified Swap Agreement means the value as of any given time obtained by dividing the total premium or discount at or an Exchange Agreement it shall give notice to each Rating Agency of its intent and shall which such obligation was purchased by the number of days remaining to maturity on such provide to the Rating Agency copies of the proposed Qualified Swap Agreement or Exchange obligation at the date of such purchase and by multiplying the amount thus calculated by the Agreement and any other documentation or information reasonably requested by the Rating number of days having passed since such purchase; and (i) in the case of an obligation purchased Agency in sufficient time for the Rating Agency to comment on the proposed Qualified Swap at a premium by deducting the product thus obtained from the purchase price, and (ii) in the case Agreement or Exchange Agreement and to indicate the effect of such agreement on the rating of an obligation purchased at a discount by adding the product thus obtained to the purchase assigned by that Rating Agency to any Series of Bonds. price. Current market value shall be established as follows: (c) Any Qualified Swap Agreement shall provide that, if the rating assigned (a) As to investments the bid and asked prices of which are published on a by a Rating Agency to the Qualified Swap Provider shall be withdrawn or shall be lowered regular basis in The Wall Street Journal (or, if not there, then in The New York Times): the below the required minimum, the Authority shall have the option of (i) declaring a termination average of the bid and asked prices for such investments so published on or most recently prior event under such agreement; or (ii) requiring the Provider to post collateral or a guaranty or other to such time of determination; surety sufficient to satisfy the minimum rating requirement.

(b) As to investments the bid and asked prices of which are not published on a (d) Prior to obtaining any Credit Facility or Liquidity Facility, the Authority regular basis in The Wall Street Journal or The New York Times: the average bid price at such shall give each Rating Agency notice of its intent to do so and shall provide to the Rating time of determination for such investments by any two nationally recognized government Agency copies of the Credit Facility or Liquidity Facility, any reimbursement or purchase securities dealers (selected by the Trustee in its discretion) at the time making a market in such agreement relating thereto and any other documentation or information reasonably requested by investments; and the Rating Agency in sufficient time for the Rating Agency to comment on the proposed Credit Facility or Liquidity Facility and to indicate the effect of such Credit Facility or Liquidity (c) As to certificates of deposit and bankers’ acceptances: the face amount Facility on the rating assigned by the Rating Agency to any Series of Bonds. thereof, plus accrued interest.

-53- B-15 -54- any contract or take any action by which the rights of the Trustee or the Bondholders may be ARTICLE VII impaired. The Authority will do and continue to do, execute, acknowledge and deliver, or cause PARTICULAR COVENANTS OF THE AUTHORITY to be done, executed, acknowledged and delivered, all and every such further acts, assignments, transfers, financing statements, and assurances as the Trustee shall require, for the better SECTION 7.01. Payment of Bonds; No Extensions of Payment. assuring, pledging, confirming and continuing unto the Trustee, solely for the period the Bonds are Outstanding, all and singular the trust estate hereby pledged or assigned or intended so to be, (a) The Authority shall, out of the Revenues or other moneys of the Authority or which the Authority may be or may hereafter become bound to pledge or assign to the Trustee available for the purpose, duly and punctually pay or cause to be paid the principal or redemption for carrying out the intention or facilitating the performance of the terms of this Resolution. price of every Bond and the interest thereon, at the dates and places and in the manner set forth in the Bonds and in any coupons thereto appertaining, according to the trust intent and meaning SECTION 7.03. Indebtedness and Liens. The Authority shall not issue any thereof and satisfy and pay or cause to be paid into the Sinking Fund Account each Sinking Fund bonds, notes or other evidences of indebtedness, other than the Bonds, secured by a pledge of or Installment (if any) becoming payable with respect to any bonds. All Bonds and other evidences other lien or charge on the Revenues and shall not create or cause to be created any lien or of indebtedness issued by the Authority hereunder are and shall at all times, notwithstanding any charge on such Revenues or on any amounts held by any Fiduciary; provided, however,thatthis defects in the proceedings authorizing the same, be valid and legally binding obligations of the Section shall not prevent the Authority from issuing bonds or notes or other obligations (a) for Authority enforceable in accordance with the respective terms thereof, hereof and of the Act, the purposes of the Authority payable out of, or secured by a pledge of, Revenues to be derived and, upon the issuance and delivery thereof to the initial purchasers, neither the Authority nor on and after such date as the pledge of the Revenues provided in this Resolution shall be anyone claiming under, by or through the Authority shall raise or seek to raise any challenge to discharged and satisfied as provided herein; (b) for the purposes of the Authority which are set such validity or enforceability. forth in paragraph (a) of Section 5.13, which are payable from, and are secured by the pledge of amounts on deposit in the Subordinated Debt Fund or the General Reserve Fund and which recite (b) The Authority shall not directly or indirectly extend or assent to the on their face that such pledge of said amounts is and shall be in all respects subordinate to the extension of the time for payment of the principal of or interest on any Bonds and shall not provisions of the Resolution and the lien and pledge in favor of the Bonds created by the directly or indirectly be a party to or approve any arrangement therefor. Notwithstanding the Resolution; and (c) in anticipation of the issuance of Bonds or other evidences of indebtedness or foregoing, the holder of any Bond may extend the time for payment of the principal of or interest of Government Loans or Grants, and secured by a pledge of the proceeds of such issuance of on such Bond; provided, however, that upon the occurrence of an Event of Default, funds Bonds, Loan or Grants, and/or as provided in subsection (b) above; or (d) in anticipation of the available hereunder for the payment of the principal of and interest on the Bonds shall not be receipt of Revenues to be received in any Fiscal Year and secured by a pledge of such Revenues applied to any payment so extended until all principal and interest payments which have not been superior to that securing the Bonds, but all such notes or obligations shall mature within the extended have first been paid in full. Fiscal Year in which they shall be authorized and shall not be renewed or refunded (except by obligations maturing within such Fiscal Year), and all proceeds of such obligations shall SECTION 7.02. Protection and Preservation of Operating Rights and Pledge of immediately on receipt be deposited into the Revenue Fund and be Revenues for all purposes Revenues; Further Assurances. hereof.

(a) The Authority shall at all times, to the fullest extent permitted by law, SECTION 7.04. Sale or Encumbrance. No part of any Project shall be mortgaged, defend, preserve and protect the pledge of the Revenues and other moneys, securities and funds pledged, encumbered or otherwise disposed of except for Permitted Encumbrances and as pledged under this Resolution and all other rights of the Bondholders under this Resolution, and otherwise provided in this Section 7.04. all rights and powers of the Authority to acquire, construct, operate, maintain, improve, repair and fix, and collect tolls, fees, rents and charges for its Projects to the full extent provided by the (a) The Authority may sell or exchange at any time and from time to time any Act and hereby, against all claims, demands or challenges of any kind and nature whatsoever. property or facilities constituting part of any Project if (1) in the opinion of the Consulting Engineer delivered in writing to the Trustee and as separately determined by resolution duly (b) Without in any way limiting the generality of the foregoing, at any and all adopted by the Authority that such sale or exchange of property or facilities will not adversely times the Authority shall, as far as it may be authorized by law, pass, make, do, execute, affect the Authority’s ability to meet the Net Revenue Requirement or (2) in the opinion of the acknowledge and deliver, all and every such further resolutions, acts, deeds, conveyances, Consulting Engineer delivered in writing to the Trustee and as separately determined by assignments, transfers and assurances as may be necessary or desirable for the better assuring, resolution duly adopted by the Authority, that such property or facility to be so disposed of is not conveying granting, pledging, assigning and confirming all and singular the rights, Revenues and necessary or convenient for, or is not useful in, the operation of the associated Project, or such other moneys, securities and funds hereby pledged or assigned, or which the Authority may property or facility is obsolete or is not profitable in the operation of such Project, and is become bound to pledge or assign, or which may be necessary or appropriate in assuring that the otherwise not necessary or convenient in order to enable the Authority to operate such Project ability of any Project or Projects to produce Revenues, in the amounts contemplated or approved and continue to satisfy the Net Revenue Requirement; provided, however, that the requirements by the Authority, shall not be materially impaired in any way. The Authority shall not enter into of (1) and (2) of this paragraph shall not apply to any property valued at less than $5,000,000 (as

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such amount is escalated, beginning on January 1, 1993, in accordance with the All-Cities Consumer Price Index), as certified to the Trustee by the Accountant or by the Consulting (b) The Authority may employ the same firm or different firms to serve as the Engineer. The proceeds of any such sale or exchange not used to acquire other property Consulting Engineers for each Operating Division or Project, and the same or different firms as necessary or desirable for the safe or efficient operation of a Project shall to the extent required Transportation Consultant for each Operating Division or Project. by the Code be deposited in the Debt Service Fund and applied to the redemption of Bonds in accordance with the provisions of Article IV hereof; otherwise, such proceeds may be deposited SECTION 7.06. Annual Operating Budget. in the Revenue or such other Fund as the Authority shall direct. (a) Not less than 30 days before the beginning of any Fiscal Year the (b) The Authority may lease or make contracts or grant licenses for the Authority shall prepare and file with the Trustee a preliminary operating budget for the ensuing operation of, or make other arrangements for the use by others of, or grant easements or other year. rights with respect to, all or any part of any Project; provided that any such lease, contract, license, arrangement, easement or right (1) in the written opinion of the Consulting Engineer Each proposed budget and Annual Budget shall set forth in reasonable detail in delivered to the Trustee and as separately determined by resolution duly adopted by the respect of the Fiscal Year covered thereby the estimated Revenues and other receipts, Operating Authority, will not have a material adverse effect on the operation of such Project or compliance Expenses, and estimated amounts to be deposited in such Fiscal Year in the Debt Service Fund by the Authority with the covenants of the Authority set forth in Section 7.08 hereof; provided, (including Sinking Fund Installments), Debt Service Reserve Fund (if any), Subordinated Debt however, the requirements of this paragraph shall not apply to any property valued at less than Fund, Rehabilitation and Repair Fund, State Payment Fund and General Reserve Fund, and the $5,000,000 (as such amount is escalated, beginning on January 1, 1994, in accordance with the requirements, if any, for the amounts which are estimated to be expended from each Fund All-Cities Consumer Price Index), as certified to the Trustee by the Accountant or the Consulting established under this Resolution, together with reasonable provision for contingency receipts Engineer. Any payments received under or in connection with any such lease, contract, license, and payments. In addition, each such proposed budget and Annual Budget may, in estimating arrangement, easement or right in respect of a Project, or any part thereof, shall constitute such Revenues, provide for a reserve for such portion of such Revenues which have not been or Revenues and shall be paid directly to the Trustee for deposit into the Revenue Fund. may not be collected by the Authority. Each such proposed and Annual Budget shall also set forth such information, in such form, with respect to such Revenues, Operating Expenses and (c) No transaction permitted above shall be completed unless the Authority other expenditures and such deposits, as shall be required by law, and may set forth such receives an opinion from Bond Counsel, a copy of which shall be delivered to the Trustee, to the additional information as the Authority may determine appropriate. effect that such sale, exchange, lease, mortgage or other disposition will not adversely affect the exclusion of the interest payable on the Bonds from gross income for federal income tax (b) On or before the 15th day of the Fiscal Year covered by a proposed purposes to the extent that the affected Project or any material portion thereof was financed budget, the Authority shall finally adopt the Annual Budget for such year. through the issuance hereunder of Tax-Exempt Obligations. The Authority may at any time or from time to time amend the Annual Budget for (d) Notwithstanding any other provision hereof, the Authority may continue, the remainder of the Fiscal Year to which it relates. Copies of the Annual Budget and of any modify or replace any mortgage or other encumbrance on any Project acquired by the Authority amended Annual Budget shall be promptly filed with the Trustee, for inspection by Bondholders. by its succession to the rights and property of the Atlantic County Transportation Authority. Nothing contained in any Annual Budget or amended Annual Budget shall SECTION 7.05. Consulting Engineer and Transportation Consultant. supersede the provisions of this Resolution as to the application of Revenues or other amounts referred to herein. (a) The Authority shall, until the Bonds and the interest thereon shall have been paid or provision for such payment shall have been made: (c) If for any reason the Authority shall not have adopted the Annual Budget before the 15th day of any Fiscal Year, the preliminary budget for such year if it shall have been (1) for the purpose of performing and carrying out the duties imposed approved, or otherwise the Annual Budget for the preceding Fiscal Year, shall be deemed to be on the Consulting Engineers by this Resolution, employ one or more Independent in effect for such Fiscal Year until the Annual Budget for such Fiscal Year is adopted and filed engineers or engineering firms or corporations having a nationwide and favorable with the Trustee. reputation for skill and experience in such work. SECTION 7.07. Limitations on Operating Expenses. The Authority shall not pay (2) for the purpose of performing and carrying out the duties imposed Operating Expenses in any year in excess of the reasonable and necessary amount thereof, and on the Transportation Consultant by this Resolution, employ one or more Independent shall not expend any amount for maintenance, repair and operation in excess of the amounts engineers or engineering firms or corporations having a nationwide and favorable provided for Operating Expenses (excluding expenses for maintenance which have been reputation for skill and experience in such work. capitalized as Costs of a Project which shall be paid from the Construction Fund and not as

-57- B-16 -58- Operating Expenses) in the Annual Budget, as the same may be amended from time to time in in effect the schedule of tolls, fares, fees and other charges recommended by the Transportation accordance with applicable law and the provisions hereof, then in effect. Nothing in this Section Consultant. contained shall limit the amount which the Authority may expend for Operating Expenses in any year, provided any amounts expended therefor in excess of the Annual Budget shall be received (c) The Authority may increase tolls, fares, passenger facility charges, fees by the Authority from a source (which shall include moneys at the time held in the Rehabilitation and other charges with respect to any Project and may make any other adjustment or and Repair Fund and available for the purpose pursuant to Section 5.09 hereof) other than the reclassification of tolls, fares and other charges or establish special rates provided that such other Revenues and the Authority shall not be required to make any reimbursement therefor out of adjustment, reclassification or establishment of special rates (i) is concurred in by the Revenues. Transportation Consultant and affects tolls, fares, fees and other charges accounting for less than 10% of the Revenues, as evidenced by a certificate filed with the Trustee, or (ii) is subject to a SECTION 7.08. Rates and Charges. certification of the Transportation Consultant, filed with the Trustee, that the changed tolls, fares and other charges will not result in a reduction in Revenues by reason of collectability, reduction (a) (1) The Authority shall at all times fix, impose, charge and collect in traffic or usage or costs of operation or any other reason. tolls, fares, fees and other charges for the use of the Transportation System as shall be required in order that in each Fiscal Year Net Revenues and Airport Revenues Available for Debt Service (d) The Authority shall forthwith upon the adoption of any schedule of tolls, shall at least equal the Net Revenue Requirement for such year; and fares, fees and other charges or revision thereof file certified copies thereof with the Trustee.

(2) The Authority shall at all times fix, impose, charge and collect (e) The failure in any Fiscal Year to comply with the Net Revenue tolls, fares, fees and other charges for the use of the Transportation System as shall be required in Requirement shall not constitute an Event of Default hereunder if the Authority shall comply order that in each Fiscal Year, Current Revenues and Airport Revenues Available for Debt with subsection (b) above; provided that if the Transportation Consultant (relying upon the Service shall at least equal the Operating Expenses for Pledged Projects for such Fiscal Year, the certificate of the Consulting Engineers hereinafter mentioned in this Section) shall be of the Debt Service on all Outstanding Bonds (net of capitalized interest) and Subordinated opinion, as shown by their certificate filed with the Trustee, that a schedule of tolls, fares, fees or Indebtedness for such Fiscal Year and any required deposits to the Debt Service Reserve Fund, other charges for the Projects or some of the Projects which would provide funds to meet the Net the Rehabilitation and Repair Fund and the General Reserve Fund, if any such deposits are Revenue Requirement is impracticable at that time, and the Authority therefore cannot comply required. with subsection (b) of this Section 7.08, then the Authority shall fix and establish such schedule of tolls, fares, fees or other charges for each Project as is recommended in such certificate by the (b) On or before thirty (30) days prior to the end of each Fiscal Year the Transportation Consultant to comply as nearly as practicable with the Net Revenue Requirement, Authority shall complete a review of its financial condition for the purpose of estimating whether and in such event the failure of the Authority to meet the Net Revenue Requirement and to the Net Revenues and Airport Revenues Available for Debt Service for such year and for the comply with subsection (b) above shall not constitute an Event of Default hereunder. The next succeeding year will be sufficient to comply with subsection (a) of this Section 7.08 and Transportation Consultant’s Certificate shall be accompanied by a certificate of the Consulting shall by resolution make a determination with respect thereto. Such review shall take into Engineers setting forth estimates of payments for the then-current and each future Fiscal Year for consideration the completion of any uncompleted Projects and the issuance of future Series of Operating Expenses, giving effect to the construction of any uncompleted Project. The Trustee Bonds if necessary to finance the completion of such uncompleted Projects. A copy of such may, and if directed by the Owners of not less than 10% in principal amount of the Bonds resolution, certified by an Authorized Officer, together with a certificate of such Authorized Outstanding and upon being indemnified to its satisfaction, shall, institute and prosecute in a Officer setting forth a reasonably detailed statement of the actual and estimated Revenues, court of competent jurisdiction an appropriate action to compel revision of the schedule of tolls, Airport Revenues Available for Debt Service, Operating Expenses, Aggregate Debt Service, fares, fees or other charges and the fixing, charging and collection thereof in accordance with the Rehabilitation and Repair Requirement, Subordinated Debt Fund requirement, State Payment Act and with any of the covenants contained in this Section 7.08, provided that in any such and General Reserve Fund requirement (if any), and any other estimates or assumptions upon proceeding the Authority shall have the right to designate the specific tolls, fares, fees or other which such determination was based, shall be filed with the Trustee on or before ten (10) days charges to be revised and the amounts of such revisions, provided that such revisions shall be in prior to the end of such Fiscal Year. If the Authority determines that the Revenues and Airport accordance with the Act and with any of the covenants contained in this Section 7.08. Revenues Available for Debt Service may not be so sufficient, it shall (i) forthwith cause the Transportation Consultant to make a study for the purpose of recommending a schedule of tolls (f) The Authority shall not effect any reduction in any toll, fare, fee or other and charges for each Project which, in the opinion of the Transportation Consultant, will cause charge fixed for the use of any Project except after 30 days’ notice to the Trustee and then only sufficient Revenues to be collected in the following Fiscal Year to comply, taking into account if, accompanying said notice, there shall be filed with the Trustee: Airport Revenues Available for Debt Service, with the Net Revenue Requirement and will cause additional Revenues to be collected in such following and later Fiscal Years sufficient to (1) A certificate of an Authorized Officer to the effect that cumulative eliminate the amount of any deficiency at the earliest practicable time, and (ii) as promptly as reductions in the immediately preceding 12 months, including the proposed and all other practicable but no later than 90 days after the start of the succeeding Fiscal Year, adopt and place reductions as if they had been in effect for such period, would not reduce Net Revenues

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for such period by more than one percent (1%), with schedules of Project use and toll, fare, fee and other charge collections demonstrating such conclusion and that, taking into SECTION 7.09. Classifications of Tolls, Fares, Fees and Other Charges; Free account such reductions, the Authority would have met the Net Revenue Requirement for Passage. such period; or (a) The Authority’s toll, fare, fee and other charge classifications shall be (2) (A) A certificate of the Transportation Consultant stating established on reasonable bases and the Authority shall have the right and discretion to establish whether, to the best of their knowledge, any Federal, State or other agency is then and maintain the same to make provisions for such matters as future peak pricing, car-pooling, projecting or planning the construction, improvement, or acquisition of any facility one-way toll collection and other categories of usage of its facilities or the services thereof as which, in the opinion of the Transportation Consultant, may be materially competitive shall at the time constitute sound practice. with any part of any Project and the estimated date of completion of such facility, and setting forth estimates of Revenues and Airport Revenues Available for Debt Service, (b) The Authority shall not grant free passage for the use of its Projects giving effect to the completion of any uncompleted Project, for the then-current and each (except Feeder Roads) except as permitted or required by the Act and as the Authority from time future Fiscal year to and including the latest maturity of the Bonds on the following to time may determine by resolution, each such resolution to contain a determination by the assumptions: (i) that any such competing highway or other facility will be completed on Authority, based on a certificate of an Authorized Officer that cumulative exemptions in the such estimated date and will thereafter be in operation during the period covered by such immediately preceding 12 months, including the proposed exemption if it had been in effect for estimates, and (ii) that no additional traffic or usage will result from such proposed toll or such period, would not reduce Net Revenues for such period by more than one percent (1%), charge reduction; and with schedules of Project use and toll, fare, fee and other charge collections demonstrating such conclusion and that, taking into account such exemptions, the Authority would have met the Net (B) A certificate of the Consulting Engineers setting forth, for Revenue Requirement. the years and on the assumptions specified in the certificate of the Transportation Consultant delivered pursuant to clause (A) of this Section, estimates of Operating SECTION 7.10. Insurance Coverages. Expenses, Rehabilitation and Repair Requirement, State Payment Requirement, Subordinated Debt Fund and General Reserve Fund requirements, if any, giving effect to (a) The Authority shall at all times maintain, to the extent reasonably the completion of any uncompleted Project; and obtainable, the following kinds and the following amounts of insurance, or otherwise make provision for the payment of claims against the Authority, with such variations as shall (C) A certificate of an Authorized Officer setting forth (i) the reasonably be required to conform to applicable standard or customary insurance practice and Aggregate Debt Service (without excluding Bond interest the payment of which shall subject to such exceptions and permissible deductions as are ordinarily required, all to be have been provided by payments or deposits out of Bond proceeds) for the next preceding determined by the Authority after consultation with its insurance consultants: calendar year, (ii) Rehabilitation and Repair Requirements, State Payment, Subordinated Debt Fund and General Reserve Fund requirements, if any, for the then-current Fiscal (1) Property insurance on all real and personal property owned by the Year, and estimated such Requirements and Payments for each such future Fiscal Year, Authority or used by it and in which it has an insurable interest, in sufficient amounts to (iii) the Aggregate Debt Service for the then-current and each future Fiscal Year, and cover direct physical loss or damage from causes normally insured against; (iv) the Net Revenues and Airport Revenues Available for Debt Service for the next preceding Fiscal Year; and stating (v) that such Net Revenues and Airport Revenues (2) Liability insurance to cover injury to persons or damage to Available for Debt Service have equaled at least the Net Revenue Requirement for such property for claims arising out of the construction, maintenance, reconstruction or preceding Fiscal Year, (vi) that the estimated Net Revenues (based on the certificates operation of the facilities owned or operated by the Authority; filed pursuant to clauses (1) and (2) of this Section) and Airport Revenues Available for Debt Service for the then-current and each future Fiscal Year are not less than the Net (3) Business interruption insurance covering loss of Revenues due to Revenue Requirement for each such year, (viii) if there shall be any uncompleted Project, any interruption in the use of any facilities of the Authority which would cause a loss of that the Net Revenue Requirement for each such year includes the Aggregate Debt revenue to the Authority; Service, as estimated by such Authorized Officer, with respect to all future Series of Bonds which (based on estimates by the Consulting Engineers of Costs of Construction (4) Any coverage required to be maintained by any State or federal of such Projects) will be required to complete such Projects, (ix) that the Authority is not law, including, but not limited to, workers’ compensation coverage and motor vehicle in default in the performance of any of the covenants, conditions, agreements or liability coverage; provisions contained in the Bonds, this Resolution or any Qualified Swap Agreement, and (x) that the amount in the Debt Service Reserve Fund is at least equal to the Debt Service Reserve Requirement.

-61- B-17 -62- (5) Any coverage which is customarily deemed appropriate to protect and the Accountant’s report thereon shall be mailed annually to the Consulting Engineers and the interests of the Authority during any construction or reconstruction of any portion of Transportation Consultant and any Bondholder who shall request in writing one time that such the Transportation System; and information be so supplied.

(6) Any additional insurance coverages which may be necessary or SECTION 7.13. Offices for Servicing Bonds. The Authority shall at all times prudent to protect the interests of the Authority. maintain an office or agency in the State of New Jersey or in the Borough of Manhattan, City and State of New York, or in the City of Philadelphia, Pennsylvania, where Bonds and coupons, (b) The Authority shall file with the Trustee annually, within 100 days after if any, may be presented for registration, transfer or exchange, and, if Bonds in bearer form shall the close of each Fiscal Year, a certificate of an Authorized Officer (1) describing in reasonable be issued under the provisions hereof, an office or agency in the Borough of Manhattan, City and detail the insurance or other provisions then in effect pursuant to this Section 7.10. and that the State of New York, where Bonds and coupons, if any, may be presented for payment or Authority has complied in all respects with the requirements of this Section 7.10., (2) an redemption. The Authority hereby appoints the Trustee as its Registrar for the registration, Insurance Consultant’s certificate stating recommended coverages for the succeeding Fiscal transfer or exchange of Bonds and coupons. The Authority shall appoint one or more Paying Year, and the estimated costs thereof, which shall be stated to be reasonable, and (3) stating Agents as its agent to maintain such office or agency for the payment or redemption of Bonds whether during such year any portion of any Project has been materially damaged or destroyed and any coupons. and, if so, the amount of insurance proceeds covering such loss or damage and the Authority’s reasonable and necessary costs of reconstruction or replacement thereof. SECTION 7.14. Certain Tax Covenants. The Authority shall not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the SECTION 7.11. Reconstruction; Application of Insurance Proceeds. If any exclusion from gross income of the interest on any Series of Bonds under Section 103 of the useful part of any Project shall be damaged or destroyed, the Authority shall, as expeditiously as Code, if such Series is issued as Tax-Exempt Obligations. Without limiting the generality of the may be possible, commence and diligently prosecute the reconstruction, repair or replacement of foregoing, the Authority shall not, directly or indirectly, use or permit the use of any proceeds of the damaged property so as to restore the same to use. The proceeds of any insurance with the Bonds or any other funds of the Authority, or take or omit to take any action that would cause respect to such damage or destruction (other than business interruption or use and occupancy any Series of Bonds to be “arbitrage bonds” within the meaning of Section 148(a) of the Code. insurance which shall be deposited in the Revenue Fund) shall be applied to the necessary costs To that end, the Authority shall comply with all requirements of Section 148 of the Code to the involved in such reconstruction, repair and replacement. If the Costs of such reconstruction, extent applicable to the Bonds. In the event that at any time the Authority is of the opinion that repair and replacement exceed the proceeds of such insurance available for payment of the same, for purposes of this Section 7.14 it is necessary to restrict or limit the yield on the investment of moneys in the General Reserve Fund or available therefor in the Construction Fund shall be used any moneys held by the Trustee pursuant to this Resolution or otherwise, the Authority shall so to the extent necessary for such purposes. The Authority may also issue Bonds or Subordinated instruct the Trustee in writing, and the Trustee shall take such action as may be necessary in Indebtedness for such purpose, as provided herein. accordance with such instructions.

SECTION 7.12. Accounts, and Periodic Reports and Certificates. SECTION 7.15. Conditions Precedent. Upon the date of issuance of any of the Bonds, all conditions, acts and things required by the Constitution or statutes of the State or by (a) The Authority shall keep or cause to be kept proper books of record and the Act or the Resolution to exist, to have happened or to have been performed precedent to or in account (separate from all other records and accounts) in which complete and correct entries the issue of such Bonds shall exist, have happened and have been performed, and such Bonds, shall be made of its transactions relating to each Project and under this Resolution and which, together with all other indebtedness of the Authority, shall be within every debt and other limit together with all other books and papers of the Authority, including insurance policies, shall at prescribed by said Constitution or statutes. all reasonable times be subject to the inspection of the Trustee or the Holder or Holders of not less than five percent (5%) in principal amount of the Bonds then Outstanding or their SECTION 7.16. Authority Existence and Compliance With Laws. The representatives duly authorized in writing. Authority shall maintain its existence throughout the term of the Bonds; shall use its best efforts to maintain and renew all its rights, powers and privileges and shall comply with all valid and (b) The Authority shall annually, within one hundred twenty (120) days after applicable laws, acts, rules, regulations, permits, orders, requirements and directions of any the close of each Fiscal Year, file with the Trustee an annual report for said Year, accompanied legislative, executive, administrative or judicial body of competent jurisdiction. by an opinion of an Accountant as to examination of the financial statements therein and describing such statements as fairly presenting the information therein, relating to the Authority SECTION 7.17. Performance of Obligations. The Authority shall in all respects and its operations and including statements in reasonable detail of: financial condition as of the promptly and faithfully keep, perform and comply with all the terms, provisions, covenants and end of said Year, income and expenses for said Year; and, with respect to each Fund created by conditions of this Resolution and any other contracts, agreements, instruments or documents the Resolution, the statement of cash receipts therein and disbursements therefrom during said executed by it in connection with the issuance of the Bonds or the financing of any Projects. Year and the amounts held therein at the end of said Year. A copy of such financial statements

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SECTION 7.18. Taxes; Liens. The Authority shall pay all taxes and assessments (4) if the Authority fails fully and punctually to perform any other including income, profits, property or excise taxes which may now or hereafter be levied or covenant in the Bonds or in this Resolution and such default continues for thirty (30) assessed by federal, state or municipal governments upon the Authority, any Project or part days after written notice requiring the same to be remedied shall have been given to the thereof, or upon any franchises, business transactions, income, revenues, earnings, receipts or Authority by the Trustee, which may give such notice in its discretion and shall give such otherwise in connection with any Project for the payment or collection of which the Authority notice at the written request of the Holders of not less than 25% in principal amount of may be liable or accountable under any lawful authority by reason of its interest in or its Bonds then Outstanding; provided, however, that if such performance requires work to be earnings, profits or receipts from any Project. Except as specifically permitted hereunder, the done, actions to be taken, or conditions to be remedied, which by their nature cannot Authority shall not create or suffer to be created any lien or charge upon any Project or part reasonably be done, taken or remedied, within such thirty (30) day period, no Event of thereof, or upon the Revenues; provided, however, that nothing herein shall require the Authority Default shall be deemed to have occurred or exist if and so long as the Authority shall to pay or cause to be discharged, or make provision for, any such taxes, assessments, liens or commence such performance within such thirty (30) day period and shall diligently and charges, so long as the validity thereof is being contested in good faith and either by appropriate continuously prosecute the same to completion. legal proceedings or by negotiations conducted with utmost due diligence and, in the opinion of the Trustee (which may rely on a Counsel’s Opinion as to such matter) after notice duly given, (5) ifthereshallbeenteredanorderofreliefagainst,orthefilingofa neither any Project nor any rent or income therefrom or interest therein would be in any petition by or against the Authority under Title 11 of the United States Code, as the same immediate danger of being sold, forfeited, attached or lost; and the Authority will, promptly after may be amended from time to time, or any successor statute thereto, which order or a final determination of such contest or proceedings, or after the parties reach agreement petition shall not be stayed or dismissed within ninety (90) days of the filing thereof, or if following such negotiations, fully pay and discharge any amounts which may be levied, assessed, the Authority shall be adjudicated a bankrupt, a debtor or an insolvent thereunder or charged, imposed, determined or agreed upon as payable therein or in connection therewith, under any applicable State law, or shall admit in writing its inability to pay its debts as together with all penalties, fines, interests, costs and expenses in connection therewith, and they mature, or shall make an assignment for the benefit of its creditors or composition perform all acts the performance of which shall be ordered, decreed or agreed upon as a result agreement with all or a material part of its creditors; or if the Authority shall apply for or thereof. consent to the appointment of any receiver, trustee, executor, sequestrator, conservator, liquidator or other judicial representative, similar or dissimilar for itself or for all of any SECTION 7.19. Enforcement of Resolution and Other Contracts. The substantial part of its property or of the Revenues; or any such judicial representative Authority shall cause all Projects to be constructed and installed in accordance with the terms of shall be appointed without the application or consent of the Authority; or if the Authority this Resolution and any applicable Supplemental or Series Resolution, and shall enforce all of its shall institute or have instituted against it (by petition, application, answer, consent or rights and privileges, and shall require every party with which it contracts to perform such otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment or party’s contractual obligations, in accordance with the true tenor and meaning thereof. debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction.

ARTICLE VIII In determining whether an Event of Default under clauses (1) or (2) of this subsection (a) EVENTS OF DEFAULT AND REMEDIES has occurred, no effect shall be given to payments made under any Credit Facility, or from amounts withdrawn from the Debt Service Reserve Fund and applied to such payments. SECTION 8.01. Events of Default Defined. (b) The Trustee shall notify the Authority and the Holders of all Bonds (a) Each of the following shall be an Event of Default hereunder: Outstanding of the occurrence of any Event of Default, except that in the case of an Event of Default described in clause (4) of subsection (a) hereof, the Trustee may withhold notice from (1) if payment of any installment of interest is not made by the the Bondholders, if the Trustee in good faith determines that such withholding is in the interest Authority when it becomes due and payable; or of the Bondholders.

(2) if payment of the principal or Redemption Price of any Bond is not SECTION 8.02. Acceleration and Annulment Thereof. made by the Authority when it becomes due and payable at maturity or upon call for Mandatory Redemption; or (a) If any Event of Default occurs and is continuing, the Trustee may and, at the written direction of the holders of a majority in principal amount of the Bonds then (3) if the Authority fails fully and punctually to perform its obligations Outstanding, shall, by notice in writing to the Authority declare the principal of all Bonds then under Section 7.08 hereof; or Outstanding to be immediately due and payable, and upon such declaration the said principal together with interest accrued thereon, shall become due and payable immediately at the place of payment provided therein, anything in this Resolution or in the Bonds to the contrary

-65- B-18 -66- notwithstanding; provided, however, that no such declaration shall be made if the Authority Trustee and independent contractors engaged for the purposes hereof, including, inter alia,its cures such Event of Default prior to the date of the declaration. attorneys and engineers.

(b) If after the principal of the Bonds has been so declared to be due and SECTION 8.05. Application of Moneys after Default. If an Event of Default has payable, all arrears of interest upon the Bonds (together with any principal then due other than by occurred and is continuing, the Authority shall pay or cause to be paid over the Trustee all reason of the acceleration) are paid by the Authority, and the Authority also performs all other Revenues then on hand or in the possession of any Depositary, and all Revenues thereafter things in respect to which it may have been in default hereunder and pays the reasonable charges arising, together with any moneys and investments then held by the Authority and constituting of the Trustee, the Bondholders, and any receiver hereunder appointed, including reasonable the property of any Fund or Account hereunder. attorneys’ fees of each, or provision for such actions and payments satisfactory to the Trustee shall have been made, then, and in every such case, the Trustee if it shall have acted on its own Such moneys shall be applied by the Trustee in the following amounts and priorities: motion and there shall not have theretofore been delivered to it written direction to the contrary by the Holders of a majority in principal amount of the then-Outstanding Bonds, or the Holders (a) To the payment of the reasonable and proper charges, expenses, costs and of such aggregate principal amount acting on their own, may by written notice to the Authority liabilities of the Trustee, including without limitation the reasonable expenses of counsel (and to the Holders or Trustee, as applicable) annul such declaration and its consequences and employed by it, and of any engineer or firm of engineers engaged by it for purposes of this such annulment shall be binding upon the Trustee and upon all Holders of Outstanding Bonds Article; issued hereunder; provided, however, that no such annulment shall extend to or affect any subsequent default or impair or exhaust any right or remedy consequent thereto. (b) To the payment of the amounts required for reasonable and necessary Operating Expenses and for the reasonable renewals, repairs and replacements of the Projects SECTION 8.03. Legal Proceedings by Trustee. If any Event of Default has necessary to prevent loss of Revenues, as certified to the Trustee by an Independent engineer or occurred and is continuing, the Trustee in its discretion may, and upon the written request of the firm of engineers of recognized standing (who may be an engineer or firm of engineers retained Holders of a majority in principal amount of the Bonds then Outstanding and receipt of by the Authority for other purposes) selected by the Trustee; indemnity to its satisfaction shall, in its own name: (c) To the payment of the interest and principal or Redemption Price then due (a) by any action, writ, proceeding in lieu of prerogative writ, the compelling on the Bonds and all Qualified Swap Obligations then due under any Qualified Swap Agreement, of specific performance, or other suit, action or proceeding at law or in equity, enforce all rights as follows: of the Bondholders, including the right to require the Authority to charge and collect rates, rentals and other charges adequate to carry out the terms of this Resolution and to require the (1) if the principal of all the Bonds shall not have become or have Authority to carry out all other agreements with, or for the benefit of, the Bondholders and to been declared due and payable, perform its duties hereunder and under the Act; First: To the payment of interest then due on the Bonds in the (b) bring suit upon the Bonds; order of the maturity of the installments thereof then due, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same (c) by action or suit in equity require the Authority to account as if it were the date, then to the payment thereof ratably, according to the amounts due in respect of each trustee of an express trust for the Bondholders; and Bond, without priority or preference of any Bond or Series over any other;

(d) by action or suit in equity enjoin any acts or things which may be unlawful Second: To the payment of the unpaid principal or Redemption or in violation of the rights of the Bondholders. Price of any Bonds which shall have become due, whether at maturity or by call for mandatory sinking fund redemption, and all Qualified Swap Obligations which have In connection with the foregoing, the Trustee shall in addition to those rights and powers become due under Qualified Swap Agreements, in the order of their due dates, and, if the specifically enumerated above, have all powers necessary or appropriate for the exercise or in aid amount available shall not be sufficient to pay in full all such amounts due on any date, of such powers and rights as incident to the general representation of the Bondholders and the then to the payment thereof ratably, according to the amounts due in respect of each Bond enforcement and protection of their rights. and each Qualified Swap Agreement, without priority or preference of any Bond or Series or any Qualified Swap Agreement over any other; and SECTION 8.04. Access to Records. If an Event of Default has occurred and is continuing, the books of record and account of the Authority, and all other records relating to its Third: To the payment to any Credit Issuer entitled to operations and the Projects shall at all times be subject to inspection, copying and use by the reimbursement for a draw or other payment on a Credit Facility supporting the Bonds.

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(2) if the principal of all the Bonds shall have become or have been declared due and payable, SECTION 8.07. Bondholders May Direct Proceedings. The holders of a majority in principal amount of the Bonds then Outstanding hereunder shall have the right to direct the First: To the payment of the principal and interest then due and method and place of conducting all remedial proceedings by the Trustee hereunder, provided unpaid upon the Bonds and all Qualified Swap Obligations which have become due such directions shall not be otherwise than in accordance with law or the provisions of this under any Qualified Swap Agreement, without priority or preference of principal over Resolution, and that the Trustee shall have the right to decline to follow any such direction which interest or of interest over principal, or of any installment of interest over any other in the opinion of the Trustee would be unjustly prejudicial to Bondholders not parties to such installment of interest, or of any Bond or Series over any other Bond or Series or of any direction. Bond payments over any Qualified Swap Obligations or any Qualified Swap Obligations over any Bond payments, ratably, according to the amounts due respectively; and SECTION 8.08. Limitations on Actions by Bondholders. No Holder of any of the Bonds shall have any right to institute any suit, action or proceeding in equity or at law for Second: To the payment to any Credit Issuer entitled to the enforcement of this Resolution or for execution of any trust hereunder, or for any other reimbursement for a draw or other payment on a Credit Facility supporting the Bonds. remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of an Event of Default, and unless the Holders of not less than a majority of the Bonds If and whenever all overdue installments of interest on all Bonds, together with Outstanding shall have made written request to the Trustee, after the right to exercise such the reasonable and proper charges, expenses and liabilities of the Trustee, and all other sums powers or rights of action shall have accrued, and shall have afforded the Trustee a reasonable payable by the Authority under this Resolution, including the principal and Redemption Price of opportunity either to proceed to exercise the powers granted in this Resolution or to institute and accrued unpaid interest on all Bonds by or for the account of the Authority, and all Qualified such action, suit or proceeding in its or their name, and unless also there shall have been offered Swap Obligations to each Qualified Swap Provider under each Qualified Swap Agreement, shall to the Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities be paid by or for the account of the Authority, or provision satisfactory to the Trustee shall be to be incurred therein or thereby, and the Trustee shall have refused or neglected to comply with made for such payment, and all defaults under this Resolution or the Bonds shall be made good such request within thirty (30) days; and such notification, request and offer of indemnity are or secured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate hereby declared in every such case, unless waived by the Trustee, to be conditions precedent to shall be made therefor, the Trustee shall pay over to the Authority all moneys, securities, and the execution of the powers and trusts of this Resolution and to any action or cause of action for funds then remaining unexpended in the hands of the Trustee (except moneys, securities, funds the enforcement of this Resolution or for any other remedy hereunder, it being understood and deposited or pledged, or required by the terms of this Resolution to be deposited or pledged, with intended that no one or more Holders of any Bonds shall have any right in any manner whatever the Trustee), and thereupon the Authority and the Trustee shall be restored, respectively, to their by his or their action to affect, disturb or prejudice the security of this Resolution, or to enforce former positions and rights under this Resolution. No such payment over to the Authority by the any right hereunder, except in the manner herein provided, and that all proceedings at law or in Trustee nor such restoration of the Authority and the Trustee to their former positions and rights equity shall be instituted and maintained in the manner herein provided and for the ratable shall extend to or affect any subsequent default under this Resolution or impair or exhaust any benefit (subject to all of the terms, conditions and provisions of this Resolution) of all Holders of right consequent thereon. such Outstanding Bonds.

Whenever moneys are to be applied pursuant to the provisions of this Section SECTION 8.09. Trustee May Enforce Rights Without Possession of Bonds. All 8.05, such moneys shall be applied at such times, and from time to time, as the Trustee shall rights under this Resolution and the Bonds may be enforced by the Trustee without the determine, having due regard to the amount of such moneys available for application and the possession of any Bonds or the production thereof at the trial or other proceedings relative likelihood of additional moneys becoming available for such application in the future. Whenever thereto, and any proceeding instituted by the Trustee shall be brought in its name for the ratable the Trustee shall apply such funds, it shall fix the date on which such application is to be made benefit of the Holders of the Bonds. and on such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of SECTION 8.10. Remedies Not Exclusive. Except as limited under Section 12.06 any such moneys and of the fixing of any such date, and shall not be required to make payment hereof, no remedy herein conferred is intended to be exclusive of any other remedy or remedies, of any Bond until such Bond shall be presented to the Trustee for appropriate notation of and each remedy is in addition to every other remedy given hereunder or now or hereafter payment or for cancellation if fully paid. existing at law or in equity or by statute.

SECTION 8.06. Discontinuation of Proceedings by Trustee. If any proceeding SECTION 8.11. Delays and Omissions Not to Impair Rights. No delay or taken by the Trustee on account the occurrence and continuation of any Event of Default is omission in respect of exercising any right or power accruing upon any default, nor any course of discontinued or is determined adversely to the Trustee, the Authority, the Trustee and the dealing between the Authority and the Trustee shall impair any such right or power or be a Bondholders shall be restored to their former positions and rights hereunder as though no such waiver of such default, and every remedy given by this Article may be exercised from time to proceeding had been taken. time and as often as may be deemed expedient.

-69- B-19 -70- (b) Whenever any Fiduciary shall deem it necessary or desirable that a matter ARTICLE IX be proved or established prior to taking or suffering any action under this Resolution, such matter THE FIDUCIARIES (unless this Resolution specifically requires other evidence thereof) may be deemed to be conclusively proved and established by a certificate of an Authorized Officer, but in its SECTION 9.01. Trustee, Registrar, Paying Agent; Appointment and discretion the Fiduciary may in lieu thereof accept other evidence of such fact or matter or may Acceptance of Duties. New Jersey National Bank, West Trenton, New Jersey, is hereby require such further or additional evidence as it may deem reasonable. appointed Trustee, Registrar and Paying Agent hereunder. The Trustee shall signify its acceptance of the duties and obligations imposed upon it by this Resolution by written notice (c) Except as otherwise expressly provided in this Resolution, any request, delivered to the Authority prior to the delivery of the first Series of Bonds to be issued pursuant order, notice or other direction required or permitted to be furnished by the Authority to any to this Resolution. By delivery of such notice, the Trustee shall be deemed to have accepted its Fiduciary shall be sufficiently given if in writing and signed by an Authorized Officer. duties and obligations with respect to all Bonds issued and to be issued under this Resolution, but only, however, upon the terms and conditions set forth in this Resolution and any applicable SECTION 9.06. Compensation; Indemnification. Unless otherwise determined Series Resolution and Supplemental Resolution. by contract between the Authority and a Fiduciary, the Authority shall pay to each Fiduciary from time to time reasonable compensation for all services rendered under this Resolution, and SECTION 9.02. Additional Paying Agents. The Authority may at any time or also all reasonable expenses, charges, legal and engineering fees and other disbursements, from time to time appoint additional Paying Agents, each having the qualifications set forth in including those of its attorneys, agents, and employees, incurred in and about the performance of Section9.14hereof. their powers and duties under this Resolution. The Authority shall indemnify and save each Fiduciary, its officers, directors, employees and agents, harmless against any claims, loss, Each such Paying Agent shall evidence its acceptance of such position in writing. liability, cost or expense, including legal and engineering fees and other expenses, which it may incur in the exercise and performance of its powers and duties hereunder, and which are not due SECTION 9.03. Other Registrars. The Authority may appoint a Registrar other to its negligence or willful misconduct. Any such indemnification shall survive final payment of than the Trustee to serve as such with respect to particular Series of Bonds. Each such Registrar the Bonds or resignation or removal of the Trustee. shall have the qualifications set forth in Section 9.14 hereof, and shall evidence its acceptance of such position in writing. SECTION 9.07. Certain Permitted Acts. AnyFiduciarymaybecometheowner of any Bonds, with the same rights it would have if it were not a Fiduciary. To the extent SECTION 9.04. Responsibilities of Fiduciaries. The recitals of fact herein and in permitted by law, any Fiduciary may act as depositary for, and permit any of its officers or the Bonds shall be taken as the statements of the Authority and no Fiduciary assumes any directors to act as a member of, or in any other capacity with respect to, any committee formed to responsibility for the correctness of the same. No Fiduciary makes any representations as to the protect the rights of Bondholders or to effect or aid in any reorganization growing out of the validity or sufficiency of this Resolution or of any Bonds issued thereunder or as to the security enforcement of the Bonds or this Resolution, whether or not any such committee shall represent afforded by this Resolution, and no Fiduciary shall incur any liability in respect thereof. The the Owners of a majority in principal amount of the Bonds then Outstanding. Trustee shall, however, be responsible for any representation contained in its certificate of authentication on the Bonds. No Fiduciary shall be under any responsibility or duty with respect SECTION 9.08. Resignation of Trustee, other Fiduciaries. to the application of any moneys paid to the Authority or to any other Fiduciary. No Fiduciary shall be under any obligation or duty to perform any act which would involve it in expense or (a) The Trustee may at any time resign and be discharged of the duties and liability or to institute or defend any suit in respect hereof, or to advance any of its own moneys, obligations imposed upon it by this Resolution by giving not less than 60 days’ written notice to unless indemnified by the Authority or by Bondholders. No Fiduciary shall be liable in the Authority, and contemporaneously mailing notice thereof to each Bondholder, specifying the connection with the performance of its duties hereunder except for its own negligence or willful date when such resignation shall take effect, and such resignation shall take effect upon the day misconduct. specified in such notice unless previously a successor shall have been appointed by the Authority or the Bondholders as provided in Section 9.10 hereof, in which event such resignation shall take SECTION 9.05. Evidence on Which Fiduciaries May Act. effect immediately on the appointment of such successor. Notwithstanding the foregoing, however, no resignation of the Trustee shall take effect until a successor Trustee (but not an (a) Each Fiduciary shall be protected in acting upon any notice, resolution, interim Trustee as described in Section 9.10 (a) has been appointed and has accepted the duties request, consent, order, certificate, report, opinion (including Counsel’s Opinion), bond or other of Trustee hereunder. paper or document furnished to it pursuant to and conforming to the requirements of this Resolution, and believed by it to be genuine and to have been signed or presented by the proper (b) Any other Fiduciary may at any time resign and be discharged of the party or parties. duties and obligations imposed upon it by this Resolution, by giving not less than sixty (60)

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days’ written notice thereof to the Authority and the Trustee. On any such resignation, such bank or trust company or national banking association willing and able to accept the office on Fiduciary shall turn over to the Trustee all moneys, securities held by it or thereafter coming into reasonable and customary terms and authorized by law to perform all the duties imposed upon it its possession, and all records and books of account maintained by it in its service as a Fiduciary by this Resolution. hereunder. SECTION 9.11. Transfer of Rights and Property to Successor Trustee. Any SECTION 9.09. Removal of Trustee. The Trustee may be removed at any time, successor Trustee appointed under this Resolution shall execute, acknowledge and deliver to its with or without cause, upon thirty (30) days prior written notice by (i) the Owners of a majority predecessor Trustee, and also to the Authority, an instrument accepting such appointment, and in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the thereupon such successor Trustee, without any further act, deed or conveyance, shall become account of the Authority, by an instrument or concurrent instruments in writing signed and duly fully vested with all moneys, estates, properties, rights, powers, duties and obligations of such acknowledged by such Owners or their attorneys-in-fact duly authorized, and delivered to the predecessor Trustee; but the predecessor Trustee shall nevertheless, on the written request of the Authority, or (ii) so long as no Event of Default shall have occurred and then be continuing Authority, or of the successor Trustee, execute, acknowledge and deliver such instruments of hereunder, the Authority, by an instrument in writing signed and duly acknowledged by an conveyance and further assurance and do such other things as may reasonably be required for Authorized Officer. Copies of each such instrument shall be delivered by the Authority to each more fully and certainly vesting and confirming in such successor Trustee all its right, title and Fiduciary. interest in and to any property held by it under this Resolution, and shall pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions SECTION 9.10. Appointment of Successor Trustee. herein set forth. Should any deed, conveyance or instrument from the Authority be required by such successor Trustee for more fully and certainly vesting in and confirming to such successor (a) In case at any time the Trustee shall resign or shall be removed or shall Trustee any such moneys, estates, properties, rights, powers and duties, such deed, conveyance become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, or instrument shall be executed, acknowledged and delivered by the Authority. Any such liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public successor Trustee shall promptly notify the Paying Agents of its appointment as Trustee. officer or court shall take charge or control of the Trustee, or of its property or affairs, a successor may be appointed by (i) the Owners of a majority in principal amount of the Bonds SECTION 9.12. Merger or Consolidation. Any company into which any then Outstanding, excluding any Bonds held by or for the account of the Authority, by an Fiduciary may be merged or converted or with which it may be consolidated or any company instrument or concurrent instrument in writing signed and acknowledged by such Bondholders or resulting from any merger, conversion or consolidation to which it shall be a party or any by their attorneys-in-fact duly authorized and delivered to the interim Trustee mentioned below, company to which all or substantially all of the corporate trust business of any Fiduciary may be with copies thereof given to the Authority and the predecessor Trustee, or (ii) so long as no sold or transferred, shall be the successor to such Fiduciary without the execution or filing of any Event of Default shall have occurred and then be continuing hereunder, the Authority, by an paper or the performance of any further act; provided, however, that such company shall be a instrument or concurrent instruments in writing signed and duly acknowledged by an Authorized bank or trust company organized under the laws of any state of the United States or a national Officer and delivered to the interim Trustee mentioned below, with a copy thereof given to the banking association and shall be authorized by law to perform all the duties imposed upon it by predecessor Trustee. Pending such appointment, the Authority by a duly executed written this Resolution. instrument signed by an Authorized Officer shall forthwith appoint an interim Trustee to fill such vacancy until a successor Trustee shall be appointed by the Bondholders. The Authority shall SECTION 9.13. Adoption of Authentication. In case any of the Bonds cause notice of any such appointment made by it to be mailed to each Bondholder within three contemplated to be issued under this Resolution shall have been authenticated but not delivered, (3) days after such appointment. An interim Trustee shall not constitute a successor Trustee for any successor Trustee may adopt the certificate of authentication of any predecessor Trustee so purposes of Section 9.08 above. Any interim Trustee appointed by the Authority shall, authenticating such Bonds and deliver such Bonds so authenticated; and in case any of the said immediately and without further act, be superseded by a Trustee appointed by the Bondholders. Bonds shall not have been authenticated, any successor Trustee may authenticate such Bonds in the name of the predecessor Trustee or in its own name. (b) If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Section 9.10 within forty-five (45) days after the Trustee shall have SECTION 9.14. Qualifications of Paying Agents, Registrars. given to the Authority written notice of resignation as provided in Section 9.08 hereof, the Trustee or the Owner of any Bond may apply to any court of competent jurisdiction to appoint a (a) Any Paying Agent, in addition to the Trustee, shall be appointed by the successor Trustee. Authority and shall be a bank or trust company organized under the laws of any state of the United States or a national banking association, having paid-in capital and surplus aggregating at (c) Any Trustee appointed under the provisions of this Section 9.10 in least $20,000,000, willing and able to accept the office on reasonable and customary terms and succession to the Trustee shall be a bank or trust company or national banking association, doing authorized by law to perform all the duties imposed upon it by this Resolution. business and having its principal office in the City and State of New York or the State of New Jersey, and having capital stock and surplus aggregating at least $50,000,000, if there be such a

-73- B-20 -74- (b) Any Registrar, in addition to the Trustee, shall be appointed by the Authority and shall be a bank, trust company or national banking association doing business and (a) (1) To close this Resolution against, or impose additional limitations having an office in the State of New Jersey or in the Borough of Manhattan, City and State of or restrictions on, the issuance of Bonds, or of other notes, bonds, obligations or evidences of New York, and having paid-in capital and surplus aggregating at least $100,000,000, if there be indebtedness; such a bank, trust company or national banking association willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon (2) To impose additional covenants or agreements to be observed by it by this Resolution. the Authority which are not contrary to or inconsistent with this Resolution as theretofore in effect; SECTION 9.15. Trustee Not Deemed to Have Notice of Default. The Trustee shall not be deemed to have notice of any default hereunder, except a default under (3) To impose additional limitations or restrictions upon the Authority Section 8.01(1), (2), (4) or (5) or the failure of the Authority to file with the Trustee any which are not contrary to or inconsistent with this Resolution as theretofore in effect; document required by this Resolution, unless any officer in its corporate trust office shall have actual knowledge thereof or the Trustee shall be specifically notified in writing of such default (4) To revise the timing for the performance of certain of the by the Authority or by the Owners of not less than 10% in principal amount of the Bonds Authority’s covenants contained herein in the event that the Authority’s Fiscal Year is Outstanding, except as otherwise provided in Section 8.08 hereof; and all notices or other changed to a different twelve- (12) month period, provided that such revisions shall require instruments required by this Resolution to be delivered to the Trustee must, in order to be the performance of such covenants within the same relative time periods of the new Fiscal effective, be delivered at the corporate trust office of the Trustee. Year as is required currently;

(5) To surrender any right, power or privilege reserved to or conferred ARTICLE X upon the Authority by this Resolution; SERIES RESOLUTION (6) To confirm, as further assurance, any pledge of or lien upon the SECTION 10.01. Contents; Effectiveness; Filing. Revenues or any other moneys, securities or funds; and

(a) The Authority may at any time and from time to time adopt Series (7) To effect any other change in the Resolution or any Series Resolutions, to authorize the issuance of Series of Bonds on the general terms and conditions Resolution expressly permitted by any other Section of this Resolution or that does not provided herein, and may therein specify, determine and authorize any specific terms and materially adversely affect the Owners of the Bonds. conditions and other matters relating to the Series of Bonds being authorized thereby as shall not be inconsistent herewith. Each Supplemental Resolution described in this Section 11.01(a) shall be effective for all purposes hereof upon due adoption and approval thereof as prescribed by the Act, and filing of a (b) Unless otherwise permitted by law, a Series Resolution shall be effective copy thereof with the Trustee, certified by an Authorized Officer to be a true copy and that the in accordance with its terms upon receipt of the approvals required by Section 14 of the Act approvals and adoption referred to above have been given and occurred. (N.J.S.A. 27:25A-14), the due adoption thereof by the Authority and approval of such action by the Governor of the State as also required by Section 14 of the Act. (b) The Authority may, without Bondholder consent, but with the consent of the Trustee, at any time or from time to time adopt a Supplemental Resolution supplementing (c) Upon the adoption and approval of a Series Resolution, a copy thereof, and amending this Resolution or any Series Resolution, for one or more of the following certified by an Authorized Officer to be a true copy and that the approvals and adoption referred purposes: to above have been given and occurred, shall be filed with the Trustee. (1) To effect any other change necessary to maintain the excludability of the interest on the Bonds or other indebtedness incurred hereunder from gross income ARTICLE XI for federal income tax purposes, or, to remove federal-tax-related covenants no longer AMENDMENTS AND SUPPLEMENTS required to maintain such excludability;

SECTION 11.01. Amendments and Supplements Without Bondholder Consent; (2) To cure any ambiguity, supply any omission, or cure or correct any When Trustee Consent Required. The Authority may, without Bondholder consent, at any defect or inconsistent provision in this Resolution; and time or from time to time adopt a Supplemental Resolution supplementing and amending this Resolution or any Series Resolution for one or more of the following purposes:

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(3) To insert such provisions clarifying matters or questions arising diminishes the rights of the Owners of Bonds of such Series. The Trustee may in its discretion under this Resolution as are necessary or desirable and are not contrary to or inconsistent determine whether or not the rights of the Owners of Bonds of any particular Series or maturity with this Resolution as theretofore in effect. would be materially adversely affected or diminished by any such modification or amendment, and its determination shall be binding and conclusive on the Authority, and all Owners of the Each Supplemental Resolution described in this Section 11.01(b), accompanied by a Bonds. In making such determination, the Trustee may rely conclusively on, and shall be fully Counsel’s Opinion (which in the case of matters relating to subparagraph (b)(1) above shall be protected in relying upon, a Counsel’s Opinion. rendered by nationally recognized municipal bond counsel), that such Supplemental Resolution is authorized or permitted hereby, and in the case of Supplemental Resolutions delivered (b) The consent of Bondholders for purposes of this Section 11.02 shall be pursuant to subsection (b)(1), that the excludability of federal tax status of the Bonds shall not be obtained as follows. adversely affected by such Supplemental Resolution. On the adoption and receipt of required approvals of such Supplemental Resolution, a The Trustee shall evidence its consent to any such Supplemental Resolution pursuant to copy thereof, certified by the Secretary, shall be delivered to and held by the Trustee for the this Section 11.01(b), by an instrument executed by a corporate trust officer of the Trustee and inspection of the Bondholders. A copy of such Supplemental Resolution (or summary thereof) filed with its records relating to this Resolution, and shall be fully protected in so consenting in together with a request to Bondholders for their consent thereto in form satisfactory to the relying on a Counsel’s Opinion to the foregoing effects. The Trustee shall not be required to Trustee, shall be mailed by the Authority to Bondholders (and shall be published at least once in consent to any such Supplemental Resolution that adversely affects its rights, duties, immunities an Authorized Newspaper, if any coupon Bonds are Outstanding), but failure to mail (or publish) or standard of care hereunder. such copy and request shall not affect the validity of such Supplemental Resolution when consented to as provided in this Section 11.02. Such Supplemental Resolution shall not be SECTION 11.02. Amendments with Bondholders’ Consent. effective unless and until, and shall take effect in accordance with its terms when, there shall have been filed with the Trustee (1) the written consents of the Owners of the required principal (a) The Authority may adopt modifications or amendments to this Resolution amount of Outstanding Bonds, and (2) a Counsel’s Opinion stating that such Supplemental or any Series Resolution in addition to the amendments authorized by Section 11.01 hereof, by Resolution has been duly adopted by the Authority in accordance with the provisions of this adoption of a Supplemental Resolution with the written consent, given as provided in Resolution and has received the approvals required by the Act, is authorized or permitted by this Section 11.03 hereof, (1) of the Owners of at least a majority in principal amount of the Bonds Resolution and, when effective, will be valid and binding upon the Authority, the Bondholders Outstanding at the time such consent is given, or (2) if less than all of several Series of Bonds and the Trustee. then Outstanding are affected by the proposed modification or amendment, of the Owners of at least a majority in principal amount of the Bonds of each Series so affected and Outstanding at Any such consent shall be effective only if accompanied by proof of the holding, at the the time such consent is given. If such modification or amendment will, by its terms, not take date of such consent, of the Bonds with respect to which such consent is given. A certificate or effect so long as any Bonds of a particular Series and maturity remain Outstanding, the consent certificates of an authorized corporate trust officer of the Trustee filed with the records of this of the Owners of such Bonds shall not be required and such Bonds shall not be deemed to be Resolution, to the effect that the Trustee has examined such proof and that such proof is Outstanding for the purpose of any calculation of Outstanding Bonds under this Section. sufficient under the provisions of Section 12.02(a) and Section 12.02(b) hereof shall be conclusive that consents have been given by the Owners of the Bonds described in such If permitted by an applicable Series Resolution, a Credit Issuer for a Credit Facility or certificate or certificates of the Trustee. Substitute Credit Facility securing a Series of Bonds shall have the right to consent to amendments on behalf of the Owners of the Bonds of such Series. Any such consent shall be binding upon the Owner of the Bonds giving such consent and upon any subsequent Owner of such Bonds and of any Bonds issued in exchange therefor The above percentage requirements notwithstanding, no such modification or amendment whether or not such subsequent Owner has notice thereof or whether or not any notation thereof shall permit a change in the terms of redemption or the times of maturity of the principal of any is made upon any Bond. Any such consent may be revoked by any Owner of such Bonds by Outstanding Bonds, or of any installment of interest thereon, or a reduction in the principal filing with the Trustee, prior to the time when the Trustee’s written statement hereafter in this amount or the Redemption Price thereof or in the rate of interest thereon, without the consent of Section 11.02 referred to is filed, a written revocation, with proof that such Bonds are held by the the Owner of each such Bond, or shall reduce the percentages or otherwise affect the classes of signer of such revocation. The fact that a consent has not been revoked may be conclusively Bonds the consent of the Owners of which is required to effect any such modification or established by a certificate of the Trustee to the effect that no revocation thereof is on file with it. amendment, or shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. Any consent, or revocation thereof, may be delivered or filed prior to any mailing (or publication) required by this Article and shall not be deemed ineffective by reason of such prior For the purposes of this Section 11.02, a Series shall be deemed to be affected by a delivery or filing. modification or amendment of this Resolution if the same materially adversely affects or

-77- B-21 -78- Within thirty (30) days of any date on which the consents on file with the Trustee and not ARTICLE XII theretofore revoked shall be sufficient under this Section 11.02, the Trustee shall make and file MISCELLANEOUS with the Authority and the Trustee a written statement that the consents of the Owners of the required principal amount of Outstanding Bonds have been field with it. Such written statement SECTION 12.01. Defeasance. shall be conclusive evidence that such consents have been so filed. Any time thereafter notice, stating in substance that the Supplemental Resolution has been consented to by the Owners of (a) If the Authority shall pay or cause to be paid, to the Owners of all Bonds the required principal amount of Outstanding Bonds and will be effective as provided in this the principal or Redemption Price, and interest due or to become due thereon, and to all Section 11.02, may be given by mailing to Bondholders (but failure to mail such notice shall not Qualified Swap Providers all Qualified Swap Obligations due or to become due under each prevent such Supplemental Resolution from becoming effective and binding) and publication, if Qualified Swap Agreement, at the times and in the manner stipulated therein and in this required hereby, at least once within 60 days after such statement of the Trustee has been so Resolution, then the pledge of any Revenues and other moneys and securities pledged under this filed. The Trustee shall file with the Authority proof of the mailing (and publication, if required) Resolution, and all covenants, agreements and other obligations of the Authority to the of such notice. A record, consisting of the papers required or permitted by this Section to be Bondholders and each Qualified Swap Provider, shall thereupon be discharged and satisfied. filed by or with the Trustee, shall be conclusive proof of the matters therein stated. In such event the Trustee, upon request of the Authority, shall execute and deliver to the SECTION 11.03. Mailing. Any provision in this Article for the mailing of a notice Authority all such instruments as may be necessary or desirable to evidence such discharge and or other paper to Bondholders shall be fully complied with if it is mailed postage prepaid or satisfaction, and the Fiduciaries shall pay over or deliver to the Authority all moneys and personally delivered to each registered owner of Bonds then Outstanding at his address, if any, securities held by them pursuant to this Resolution which are not required for the payment of appearing upon the registration books of the Authority kept for the purpose. Bonds not theretofore surrendered for such payment or redemption.

SECTION 11.04. Modifications by Unanimous Action. This Resolution and the If the Authority shall pay or cause to be paid to the Owners of all Outstanding Bonds of a rights and obligations of the Authority and of the Owners of the Bonds thereunder may be particular Series or maturity within a Series the principal or Redemption Price and interest due or modified or amended in any respect by a Supplemental Resolution effecting such modification or to become due thereon, at the times and in the manner stipulated therein and in this Resolution, amendment and the consents of the Owners of all the Bonds then Outstanding, each such consent such Bonds shall cease to be entitled to any lien, benefit or security under this Resolution, and all to be accompanied by proof of the holding at the date of such consent of the Bonds with respect covenants, agreements and obligations of the Authority to the Owners of such Bonds shall to which such consent is given. Such Supplemental Resolution shall take effect upon the filing thereupon be discharged and satisfied. (a) with the Trustee of (i) a copy thereof certified by the Secretary, (ii) such consents and accompanying proofs, and (iii) the Counsel’s Opinion referred to in Section 11.03 hereof; and (b) Bonds or interest installments for the payment or redemption of which (b) with the Authority and the Trustee of the Trustee’s written statement that the consents of the moneys shall have been set aside and are being held in trust by the Paying Agent at or prior to Owners of all Outstanding Bonds have been filed with it. No mailing or publication of any their maturity or redemption date shall be deemed to have been paid within the meaning and with Supplemental Resolution (or reference thereto or summary thereof) or of any request or notice the effect expressed in this Section 12.01 if the Authority shall have delivered to or deposited shall be required. No such modification or amendment, however, shall change or modify any of with the Trustee (1) irrevocable instructions to pay or redeem all of said Bonds and specifying the rights or obligations of any Fiduciary without its written assent thereto. the dates, amounts and redemption prices of such redemptions, (2) irrevocable instructions to give notice of redemption of any Bonds so to be redeemed, (3) either moneys in an amount SECTION 11.05. Notation on Bonds. Bonds authenticated and delivered after the which shall be sufficient, or Federal Securities, the principal of and the interest on which when effective date of any action taken as in this Article XI provided may, and if the Trustee so due will provide moneys which, together with any moneys deposited with the Trustee at the determines shall, bear a notation by endorsement or otherwise in form approved by the Authority same time, shall be sufficient to pay when due the principal or Redemption Price and interest due and the Trustee as to such action, and upon demand of the Owner of any Bond Outstanding at and to become due on said Bonds on and prior to each specified redemption date or maturity date such effective date and presentation of such Owner’s Bond to the Trustee, suitable notation shall thereof, as the case may be, and (4) if any of said Bonds are not to be redeemed within the next be made on such Bond by the Trustee as to any such action. If the Authority or the Trustee shall succeeding 60 days, irrevocable instructions to publish one time, within ten (10) days of receipt so determine, new Bonds reflecting such action may be prepared, authenticated and delivered, of such instructions, in an Authorized Newspaper, a notice to the Owners of such Bonds that and upon demand of the Owner of any Bond then Outstanding shall be exchanged, without cost such deposit has been made with the Trustee and that said Bonds are deemed to have been paid to such Bondholder, for such Bond then Outstanding. in accordance with this Section 12.01 and stating the maturity or redemption date upon which moneys are to be available for the payment of the principal or Redemption Price of said Bonds. All notices required to be published by this Section shall also be mailed once to all Owners of Bonds at approximately the time of such first publication. The Federal Securities and moneys deposited with the Trustee pursuant to this Section 12.01 shall be held in trust for the payment of the principal or Redemption Price and interest on said Bonds. No payments of principal of any

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such Federal Securities or interest thereon shall be withdrawn or used for any purpose other than and the date of his holding such Bonds, may be proved by a certificate, which need not be the payment of such principal or Redemption Price of, or interest on, said Bonds unless after acknowledged or verified, of an officer of a bank, trust company, financial firm or corporation such withdrawal the amount held by the Trustee and interest to accrue on Federal Securities so (including members of the National Association of Securities Dealers, Inc.) or other depositary held shall be sufficient to provide fully for the payment of the principal of or Redemption Price satisfactory to the Trustee, showing that at a date therein mentioned such person exhibited to or and interest on such Bonds. had on deposit with such bank, trust company, firm, corporation or depositary Bonds described or referred to in such certificate; and such a certificate may be made and given by an officer or (c) Anything in this Resolution to the contrary notwithstanding, any moneys member of any bank, trust company, insurance company or financial firm or corporation held by a Fiduciary in trust for the payment and discharge of any of the Bonds which remain satisfactory to the Trustee with respect to Bonds held by it, if acceptable to the Trustee. unclaimed for six (6) years after the date when such Bonds have become due and payable, either at their stated maturity dates or by call for earlier redemption, if such moneys were held by the (d) The holding of Bonds registered otherwise than to bearer, the amount, Fiduciary at such date, or for six years after the date of deposit of such moneys if deposited with numbers and other identification thereof, and the date of holding the same, shall be proved by the Fiduciary after the said date when such Bonds become due and payable, shall, at the written Bond Register. request of the Authority, be repaid by the Fiduciary to the Authority, as its absolute property and free from trust, and the Fiduciary shall thereupon be released and discharged with respect thereto Any request, consent or other instrument executed by the Holder or Owner of any Bond and the Bondholders shall look only to the Authority for the payment of such Bonds, which shall shall bind all future Holders and Owners of such Bond in respect of anything done or suffered to be unsecured claims against the Authority and not entitled to the benefits or lien of this be done hereunder by the Authority or any Fiduciary in accordance therewith, whether or not Resolution. notation shall be made on any Bond.

SECTION 12.02. Evidence of Signatures of Bondholders and Ownership of SECTION 12.03. Preservation and Inspection of Documents. All reports, Bonds. Any request, consent, revocation of consent or other instrument which the Resolution certificates, statements and other documents received by any Fiduciary under the provisions of may require or permit to be signed and executed by Bondholders may be in one or more this Resolution shall be retained in its possession and shall be available at all reasonable times to instruments of similar tenor, and shall be signed or executed by such Bondholders in person or the inspection of the Authority, any other Fiduciary or any Bondholder, and their agents and their by their attorneys duly authorized in writing. Proof of (1) the execution of any such instrument, representatives, any of whom may make copies thereof, but any such reports, certificates, or of an instrument appointing or authorizing any such attorney, or (2) the holding by any person statements or other documents may, at the election of such Fiduciary, be destroyed or otherwise of any Bonds or coupons appertaining thereto, shall be sufficient for any purpose of this disposed of at any time six (6) years after such date as the pledge of the Revenues created by the Resolution if made in the following manner, or in any other manner satisfactory to the Trustee Resolution shall be discharged as provided in Section 12.01. which may nevertheless in its discretion require further or other proof in cases where it deems thesamedesirable: SECTION 12.04. Cancellation and Destruction of Bonds. All Bonds paid or redeemed, either at or before maturity, shall be delivered to the Trustee when such payment or (a) The fact and date of the execution by any Bondholder or his attorney of redemption is made, and such Bonds, together with all Bonds purchased by the Trustee, shall any such instrument may be provided (1) by the certificate of a notary public or other officer thereupon be promptly cancelled. Bonds so cancelled may at any time be destroyed by the authorized to take acknowledgments of deeds to be recorded in the state in which he purports to Trustee, who shall execute a certificate of destruction in duplicate by the signature of one of its act that the person signing such instrument acknowledged to him the execution thereof, or by the authorized officers describing the Bonds so destroyed, and one executed certificate shall be filed affidavit of a witness of such execution, duly sworn to before such a notary public or other with the Authority and the other retained by the Trustee. officer, or (2) by the certificate, which need not be acknowledged or verified, of an officer of a bank, trust company or financial firm or corporation (including members of the National SECTION 12.05. Parties Interested. Nothing contained in this Resolution, express Association of Securities Dealers, Inc.) satisfactory to the Trustee that the person signing such or implied, is intended or shall be construed to confer upon or give to any person, firm or instrument acknowledged to such bank, trust company, firm or corporation the execution thereof. corporation, other than the Authority, the Fiduciaries, and the Holders of the Bonds, any right, remedy or claim under or by reason of this Resolution or any covenant, condition or stipulation (b) The authority of a person or persons to execute any such instrument on hereof; and the covenants, stipulations and agreements in this Resolution contained are and shall behalf of a corporate Bondholder may be established without further proof if such instrument is be for the sole and exclusive benefit of the Authority, the Fiduciaries, their successors and signed by a person purporting to be the president or a vice-president of such corporation with a assigns, and the Holders of Bonds. corporate seal affixed, and is attested by a person purporting to be its secretary or assistant secretary. SECTION 12.06. No Personal Recourse. No covenant or agreement contained in this Resolution or any Bond shall be deemed to be the covenant or agreement of any member, (c) The amount of Bonds transferable by delivery held by any person officer, agent or employee of the Authority in his or her individual capacity. No recourse shall executing any such instrument as a Bondholder, and the numbers and other identification thereof, be had for the payment of the principal of, interest on, or the premium (if any) payable upon the

-81- B-22 -82- redemption of any Bonds, or for any claim based thereon or on this Resolution or on any amends and restates the First Amended and Restated Bond Resolution in its entirety. This Supplemental or Series Resolution against the Authority or any member, officer, agent or Second Amended and Restated Resolution and the amendments and modifications made to the employee, past, present or future, of the Authority, or of any successor corporation, as such, First Amended and Restated Resolution hereby shall be deemed to be and shall constitute a either directly or through the Authority or any such successor corporation, whether by virtue of Supplemental Resolution for all purposes of Section 11.02 of the First Amended and Restated any constitutional provision, statute or rule of law, or by the enforcement of any assessment or Resolution. This Second Amended and Restated Resolution shall become effective at the earliest penalty or otherwise, all such liability of such members, officers, agents or employees being time permitted by law after its adoption and the receipt by the Trustee of (i) the written consents released as a condition of and as material consideration for the adoption by the Authority of this of Financial Guaranty Insurance Company, Financial Security Assurance Inc. and Ambac Resolution and the issuance of the Bonds. Assurance Corporation, respectively, in their capacity as the Owners of the Outstanding Bonds required by Section 11.02 of the First Amended and Restated Bond Resolution, and (ii) the SECTION 12.07. Successors and Assigns. All the covenants, promises and Counsel’s Opinion required by Section 11.02 of the First Amended and Restated Bond agreements in this Resolution contained by or on behalf of the Authority, or by or on behalf of Resolution. This Second Amended and Restated Resolution may be revised and modified by an the Fiduciaries, shall bind and inure to the benefit of their respective successors and assigns, Authorized Officer of the Authority in a written certificate or certificates executed by such whether or not so expressed. Authorized Officer and delivered to the Trustee if such revisions or modifications are required or requested by (i) any Rating Agency or insurance company in connection with the execution and SECTION 12.08. Effect of Invalid Provisions. If any one or more of the provisions delivery by the Authority of any Qualified Swap Agreement or the obtaining of any insurance of this Resolution or of the Bonds shall, for any reason, be held to be illegal or invalid, such policy relating to a Qualified Swap Agreement, or (ii) any insurance company whose written illegality or invalidity shall not affect any other provisions of this Resolution or of the Bonds, but consent is required pursuant to clause (i) of the preceding sentence. this Resolution and the Bonds shall be construed and enforced as if such illegal or invalid provisions had not been contained herein or therein.

SECTION 12.09. Resolution a Contract. As set forth in Section 15 of the Act, N.J.S.A. 27:25A-15, the provisions of this Resolution and all of the covenants and agreements herein contained shall constitute valid and legally binding contracts between the Authority and the Holders from time to time of any of the Bonds, regardless of the time of issuance of such Bonds, and shall be enforceable by such Holders in the manner and to the extent herein provided.

SECTION 12.10. Notices. Any notice to, or other instrument to be filed with, or demand upon the Trustee may be served, presented or made by being hand-delivered or sent by registered or certified United States Mail or overnight courier service addressed to the Principal Corporate Trust Office of the Trustee at 385 Rifle Camp Road, West Paterson, New Jersey, 07424 or such other address as shall then serve as its Principal Corporate Trust Office. Any notice to, or other instrument to be filed with, or demand upon the Authority shall be deemed to have been sufficiently given or served, presented or made by the Trustee or others for all purposes by being hand-delivered or sent by registered or certified United States mail or overnight courier service addressed to the Authority at Farley Service Plaza, Milepost 21.3, Elwood, New Jersey 08217, or at such other address as may be filed in writing by the Authority with the Trustee.

SECTION 12.11. Descriptive Headings. The descriptive headings of the Articles and Sections of this Resolution are inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof.

SECTION 12.12. Governing Law. This Resolution and the Bonds shall be governed by the laws of the State of New Jersey.

SECTION 12.13. Amendment and Restatement of First Amended and Restated Bond Resolution; Effective Date. This Second Amended and Restated Resolution supersedes,

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EXHIBIT A only from the Net Revenues of the Authority’s Transportation System described in the Resolution and from certain moneys held in funds and accounts established thereunder, upon surrender hereof, the principal amount set forth above and to pay interest thereon (calculated on [FORM OF FULLY REGISTERED BOND] the basis of a 360-day year composed of twelve 30-day months) at the rate per annum shown above, but only from such sources from the Interest Payment Date (as hereinafter defined) next preceding the date of registration and authentication of this Bond, unless this Bond is registered [UNLESS THIS CERTIFICATE IS PRESENTED BY THE AUTHORIZED and authenticated as of an Interest Payment Date, in which event this Bond shall bear interest REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO from such Interest Payment Date, or unless this bond is registered and authenticated prior to THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, ______, in which event this Bond shall bear interest from ______, or unless, as EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS shown on the records of the within-mentioned Trustee, interest on this Bond shall be in default, REGISTERED IN THE NAME OF CEDE & CO., OR ANY OTHER NAME in which case this Bond shall bear interest from the date on which interest was last paid hereon. AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE Interest on this Bond is payable at the rate set forth hereon semiannually on ______and DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO ______of each year (each such date being an “Interest Payment Date”), commencing ______, CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY and continuing until stated maturity or earlier redemption. AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF The interest so payable and punctually paid or provided for on any Interest Payment Date FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS will be paid by check or draft mailed to the person in whose name this Bond is registered WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & (“Registered Owner”) on the bond register maintained by the Trustee on behalf of the Authority CO., HAS AN INTEREST HEREIN.] (“Bond Register”) at the close of business on the record date, which shall be the fifteenth (15th) day (whether or not a Business Day, as defined in the Resolution) of the calendar month immediately preceding a month containing an Interest Payment Date (“Regular Record Date”). UNITED STATES OF AMERICA Any such interest not so timely paid or duly provided for shall cease to be payable to the person STATE OF NEW JERSEY who is the Registered Owner hereof as of the Regular Record Date, and shall be payable to the person who is the Registered Owner hereof as of the close of business on the fifteenth (15th)day SOUTH JERSEY TRANSPORTATION AUTHORITY (whether or not a Business Day) (“Special Record Date”) preceding the date set for the payment of such defaulted interest (“Special Payment Date”). Such Special Payment Date shall be fixed TRANSPORTATION SYSTEM REVENUE BONDS, ____ SERIES by the Trustee whenever moneys become available for the payment of the defaulted interest, and notice of the Special Payment Date shall be given by mail to the Registered Owner as of the Special Record Date no less than ten (10) days prior to the Special Payment Date. The principal No. R- of this Bond and any redemption premium shall be payable to the registered Owner, upon surrender hereof, at the principal corporate trust office of the Trustee under the Resolution Interest Maturity Dated Authentication hereinafter mentioned. Principal of, premium, if any, and interest hereon shall be payable in any Rate Date Date Date CUSIP coin or currency of the United States of America which at the time of payment thereof is legal _.__% tender for the payment of public and private debts therein. [As long as The Depository Trust Company, New York, New York or its nominee REGISTERED OWNER: (“DTC”) is the Registered Owner of the series of bonds (“Bonds”) of which this Bond is one, payment of principal, premium, if any and interest on the Bonds made by the Trustee to DTC PRINCIPAL SUM: Dollars shall fully satisfy the aforesaid payment obligations on the Bonds to the extent of such payments by the Trustee, and no beneficial owner of any Bond shall have any recourse against the Authority or the Trustee for any failure by DTC or any direct or indirect participant therein to SOUTH JERSEY TRANSPORTATION AUTHORITY (“Authority”), a public body remit such payments to such beneficial owner.] politic and corporate and an instrumentality of the State of New Jersey organized under the South Jersey Transportation Authority Act, Chapter 251 of the Laws of 1991 of the State of New Neither the faith and credit nor the taxing power of the State of New Jersey or of any Jersey (“Act”), for value received, hereby promises to pay to the Registered Owner of this bond agency or instrumentality thereof other than the credit of the Authority to the extent referred to (“Bond”), on the maturity date hereof unless this Bond shall earlier have been duly called for above, is pledged for the payment of the principal of, the interest on or the premium if any, redemption in accordance with the terms hereof and of the within-mentioned Resolution, but payable upon this Bond; nor shall this Bond be deemed an indebtedness, obligation or liability of A-1 B-23 A-2 said State or of any agency or instrumentality thereof other than the Authority as aforesaid, either legal, moral or otherwise. The Authority has no taxing power. [With respect to any redemption referred to above, not less than thirty (30) days nor more than sixty (60) days prior to any redemption date, the Trustee shall cause notice of the call for This Bond is one of a duly authorized issue of Transportation System Revenue Bonds of redemption, identifying each Bond or portion thereof to be redeemed, to be given in the name of the Authority, known as “South Jersey Transportation Authority Transportation System Revenue the Authority and to be sent by first class mail (postage prepaid) to the Registered Owner at the Bonds, ____ Series,” in the aggregate principal amount of $______, all of like tenor, address shown on the Bond Register on the date of the selection of the Bonds to be redeemed. except as to dates of maturity, rates of interest and provisions for redemption, and all issued Notices properly mailed in accordance with the provisions hereof and of the Resolution shall be under and equally and ratably secured by a bond resolution of the Authority titled “ Second considered received by the addressee for all purposes hereof and thereof. Any failure to mail a Amended and Restated Resolution Authorizing Revenue Bonds and Other Obligations,” adopted notice to a Registered Owner, or any defect in such notice, shall not affect the validity of on April 19, 2005, which amended and restated in its entirety a bond resolution of the Authority redemption proceedings taken with respect to Registered Owners to whom proper notice was titled “Restated Resolution Authorizing Revenue Bonds and Other Obligations,” adopted on mailed. [As long as DTC is the sole Registered Owner of the Bonds, all notices of redemption December 3, 1992, as amended and supplemented, and a Series Resolution adopted on ______shall be mailed only to DTC, as provided in the Resolution.] If provision is made for redemption [and a Series Certificate executed on behalf of the Authority dated ______,] in respect of the from funds on deposit with the Trustee, all interest on the Bonds called for redemption accruing Bonds (collectively, the “Resolution”), under which The Bank of New York, West Paterson, on and after the date fixed for redemption shall cease, and the Registered Owners of the Bonds New Jersey is serving as trustee (“Trustee”). called for redemption shall have no security or benefit under the Resolution or any right except to receive payment of the redemption price and interest accrued to the redemption date from such [INSERT PURPOSES HERE] funds on deposit.]

Reference is hereby made to the Resolution for descriptions of the sources of payment for If at the time of the mailing of notice of redemption the Authority shall not have the Bonds (including, inter alia, the Net Revenues of the System, as therein defined), the nature, deposited with the Trustee moneys sufficient to redeem all such Bonds called for redemption, extent and manner of enforcement of remedies, the terms and conditions under which the such notice shall state that it is conditional and subject to the deposit of the redemption moneys Resolution may be amended or modified, the rights and limitations thereon of the Registered with the Trustee not later than the opening of business on the redemption date, and that such Owners of the Bonds and of the Trustee, and the terms and conditions under which the Bonds are notice shall be of no effect unless such moneys are so deposited. issued and on which additional series of bonds may be issued on a parity with the Bonds, to all of which, and to all of the terms of the other financing documents in respect of the Bonds as listed Whenever Bonds to be redeemed are required to be selected by lot, the Trustee shall be in the Closing Agenda in respect of the Bonds filed with the Trustee, and of the Act, reference to authorized to draw by lot the numbers of the Bonds to be redeemed in any manner deemed each of which is hereby made, each Registered Owner of any of the Bonds, by the purchase reasonable by the Trustee. In the case of a Bond of a denomination greater than $5,000, the thereof, shall be deemed to have consented as an explicit and material portion of the Trustee shall treat each such Bond as representing such number of separate Bonds, each of the consideration to the Authority for adoption of the Resolution and issuance of the Bonds. True denomination of $5,000, as is obtained by dividing the actual principal amount of such Bond by copies of the Act and executed counterparts of the Resolution and the other such financing $5,000. On the redemption of a portion of the principal amount of such Bonds, the Trustee shall documents are on file and available for inspection at the principal corporate trust office of the authenticate and cause to be delivered, on the surrender of such Bond, a new Bond or Bonds, of Trustee. any authorized denomination, as requested by the Registered Owner, in aggregate principal amount, having a maturity date and bearing interest at a rate equal to and in exchange for the If an Event of Default, as defined or referred to in the Resolution, shall occur, the unredeemed portion of the principal of the Bond so surrendered. Such exchange shall be without principal of all Bonds issued under the Resolution may be declared due and payable upon the charge to the Registered Owner. conditions and in the manner and with the effect provided in the Resolution, and the same may be annulled as therein provided. The Registered Owners of all Bonds to be redeemed may file written waivers of notice with the Trustee, and if so waived, such Bonds may be redeemed and all rights and liabilities of OPTIONAL REDEMPTION said Registered Owners shall mature and accrue on the date set for such redemption, without the requirement of written notice. [INSERT REDEMPTION PROVISIONS HERE] This Bond is fully registered in the name of the Registered Owner on the Bond Register kept at the principal corporate trust office of the Trustee, as Registrar appointed under the MANDATORY SINKING FUND REDEMPTION Resolution, such registration to be noted hereon by the Trustee on behalf of the Authority. No transfer shall be valid as against the Authority or the Trustee unless made by the Registered [INSERT REDEMPTION PROVISIONS HERE] Owner in person or be valid as against the Authority or the Trustee unless made by the Registered Owner in person or by his duly authorized attorney or legal representative and

A-3 A-4

similarly noted upon the Bond Register and hereon. Upon any such transfer or exchange, the Bond, exist have happened and have been performed, and that the issuance of this Bond is within Authority shall issue and, after due authentication by the Trustee, shall deliver to or upon the every debt and other limit prescribed by the laws of the State of New Jersey. order of the Registered Owner, a new registered Bond or Bonds, in authorized denominations aggregating the principal amount hereof, maturing on the same date, bearing interest at the same This Bond shall not be entitled to any benefit under the Resolution or be valid or become rate, bearing the same series designation as this Bond and registered in such names as shall be obligatory for any purpose until this Bond shall have been authenticated by the execution by the requested. Such transfers and exchanges shall be without cost to Registered Owners of the Trustee of the certificate of authentication endorsed hereon. Bonds, but such Registered Owners shall be required to pay any taxes or assessments levied or imposed thereon.

The Trustee will not be required to transfer or exchange any Bond (i) during a period beginning on the fifteenth (15th) day next preceding any date of mailing of notice of Bonds to be redeemed and ending on the date of such mailing, or (ii) which has been selected or called for redemption in whole or in part.

The Authority and the Trustee may treat the person in whose name this Bond is registered as the absolute owner of this Bond for all purposes whether or not this Bond shall be overdue, and neither the Authority nor the Trustee shall be affected by any notice to the contrary. All payments of the principal, premium, if any, and interest made to the Registered Owner hereof in the manner set forth herein and in the Resolution shall be valid and effectual to satisfy and discharge the liability upon this Bond to the extent of the sum or sums so paid, whether or not notation of the same be made hereon, and any consent, waiver or action taken by such Registered Owner pursuant to the provisions of the Resolution shall be conclusive and binding upon such Registered Owner, his heirs, successors and assigns, and upon all transferees hereof, whether or not notation thereof be made hereon or on any Bond issued in exchange herefor.

The Authority, pursuant to recommendations promulgated by the Committee on Uniform Security Identification Procedures, has caused CUSIP numbers to be printed on the Bonds, and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Registered Owners. No representation is made as to the accuracy of such numbers either as printed on the Bonds or as contained in any notice of redemption, and reliance may be placed only on the identification numbers prefixed “_____” and printed thereon.

No recourse shall be had for the payment of the principal of or interest or premium, if any, on this bond, or for any claim based hereon or on the Resolution or any resolution supplemental thereto, against any member, officer or employee, past, present or future, of the Authority, or of any successor corporation, as such, either directly or through the Authority or any such successor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability of such members, officers or employees being released as a specific condition of and as material consideration for the adoption of the Resolution and the issuance of this Bond.

The Act provides that the bonds of an authority organized thereunder shall have all the qualities of negotiable instruments under the negotiable instruments law of the State of New Jersey.

It is hereby certified and recited that all conditions, acts and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of this

A-5 B-24 A-6 IN WITNESS WHEREOF, SOUTH JERSEY TRANSPORTATION AUTHORITY has caused this Bond to be executed in its name and on its behalf by the signature of its Chairman or Vice Chairman and its official seal to be impressed or reproduced hereon and (FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION) attested by the signature of its Secretary, all as of the ______day of ______. TRUSTEE’S AUTHENTICATION CERTIFICATE

SOUTH JERSEY TRANSPORTATION This BOND IS ONE OF THE Bonds described in the within-mentioned Resolution. AUTHORITY

[SEAL] By: THE BANK OF NEW YORK,Trustee ______, Chairman

By: Authorized Officer

ATTEST: Date of Authentication:

By: ______, Secretary

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FORM OF ASSIGNMENT

For value received, the undersigned hereby sells, assigns and transfers unto ______the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ______, attorney, to transfer the said Bond on the Bond Register, with full power of substitution in the premises.

Dated:

Signature Guaranteed: Notice: The assignor’s signature to this Assignment must correspond with the name as it appears on the face of the within Bond in every particular without alteration or any change whatever. Signature must be guaranteed by a member firm of the New York Stock Exchange or by a commercial bank or trust company.

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COPY OF THE 2007 NOTE RESOLUTION [THIS PAGE INTENTIONALLY LEFT BLANK] Table of Contents

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ARTICLE I AUTHORITY AND DEFINITIONS...... 1 Section 101. Authority for Resolution...... 1 Section 102. Resolution to Constitute a Contract...... 1 Section 103. Definitions...... 1 ARTICLE II AUTHORIZATION OF NOTES ...... 1 Section 201. Authorization of Notes...... 1 Section 202. Purpose...... 1 Section 203. Provisions for Issuance of the Notes...... 1 Section 204. Determination in Accordance with Section 5.13(b) and 5.13(f) of the Bond Resolution...... 1 Section 205. Medium of Payment; Form and Date; Denominations; Letters and Numbers; Interest...... 1 Section 206. Execution...... 1 Section 207. Negotiability, Exchange, Transfer and Registry...... 1 Section 208. Notes Mutilated, Destroyed, Stolen or Lost...... 1 Section 209. Optional Redemption of Notes...... 1 Section 210. Receipt of Prior Approval Letters...... 1 Section 211. Appointment of Paying Agent...... 1 SOUTH JERSEY TRANSPORTATION AUTHORITY ARTICLE III PLEDGE EFFECTED BY THE RESOLUTION; FUNDS AND ACCOUNTS ...... 1 Section 301. Pledge Effected by the Resolution...... 1 Section 302. Project Fund...... 1 ARTICLE IV DEFEASANCE ...... 1 Not Exceeding $23,500,000 Section 401. Defeasance of Notes...... 1 ARTICLE V ADDITIONAL DETERMINATIONS AND PROCEEDINGS ...... 1 Section 501. Authorization of Negotiated Note Sale; Appointment of Underwriter; Approval of Purchase Contract; Selection of Underwriter; Determination Under Executive Order No. 26...... 1 Section 502. Approval of Preliminary Official Statement...... 1 ______Section 503. Authorization of Distribution of Preliminary Official Statement...... 1 Section 504. Rule 15c2-12...... 1 Section 505. Additional Proceedings...... 1 ARTICLE VI COVENANTS OF THE AUTHORITY ...... 1 Section 601. Payment of Notes...... 1 2007 SUBORDINATED NOTE RESOLUTION Section 602. Incorporation of Bond Resolution Covenants...... 1 Section 603. Additional Covenant With Respect to Balloon Indebtedness...... 1 Section 604. Covenant With Respect to Issuance of Bonds other than Refunding Bonds...... 1 ______ARTICLE VII DEFAULTS AND REMEDIES ...... 1 Section 701. Defaults...... 1 Section 702. Remedies...... 1 Section 703. Limitations on Remedies...... 1 ARTICLE VIII [INTENTIONALLY OMITTED] ...... 1 ARTICLE IX SUPPLEMENTAL RESOLUTIONS ...... 1 Adopted June 19, 2007 Section 901. Supplemental Resolutions Effective Without Consent of Noteholders...... 1 Section 902. Supplemental Resolutions Effective with Consent of Noteholders...... 1 Section 903. General Provisions...... 1 ARTICLE X AMENDMENTS...... 1 Section 1001. Mailing...... 1 Section 1002. Power of Amendment...... 1 Section 1003. Consent of Noteholders...... 1 Section 1004. Modifications by Unanimous Consent...... 1 Section 1005. Exclusion of Notes...... 1 ARTICLE XI MISCELLANEOUS...... 1 Section 1101. Parties Interested...... 1 Section 1102. No Personal Recourse...... 1 Section 1103. Successors and Assigns...... 1 Section 1104. Effect of Invalid Provisions...... 1 Section 1105. Notices...... 1 Section 1106. Descriptive Headings...... 1 Section 1107. Governing Law...... 1 Section 1108. Effective Date...... 1

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behalf of the Authority hereunder pursuant to a certificate bearing such officers’ or SOUTH JERSEY TRANSPORTATION AUTHORITY employees’ signatures and signed by the Chairman of the Authority or the Executive Director of the Authority. ______Balloon Indebtedness shall mean Subordinated Indebtedness of which 25% or 2007 SUBORDINATED NOTE RESOLUTION more of the principal matures in the same annual period and is not required by the documents pursuant to which such Subordinated Indebtedness was issued to be ______amortized by payment or redemption prior to that annual period, provided that such Subordinated Indebtedness will not constitute Balloon Indebtedness and will be assumed to amortize in accordance with its stated terms if the Trustee is provided a Adopted June 19, 2007 certificate of an Authorized Officer of the Authority certifying that such Subordinated Indebtedness is not to be treated as Balloon Indebtedness. BE IT RESOLVED by the Members of the South Jersey Transportation Authority as follows: Bond Counsel shall mean any attorney or firm of attorneys nationally recognized in the field of municipal finance and designated to act as bond counsel to the Authority. ARTICLE I Bond Resolution shall mean the Authority’s resolution entitled “Second Amended AUTHORITY AND DEFINITIONS and Restated Resolution Authorizing Revenue Bonds and Other Obligations” adopted on April 19, 2005, as amended and supplemented. Section 101. Authority for Resolution. This Resolution is adopted pursuant to the provisions of the Act and Sections 5.13 and 7.03 of the Bond Resolution. Bond Trustee shall mean the Trustee under the Bond Resolution.

Section 102. Resolution to Constitute a Contract. As set forth in Section 15 Business Day shall mean any day other than (a) a Saturday, Sunday or a day on of the Act, N.J.S.A. 27:25A-15, the provisions of this Resolution and all of the covenants which banks located in the City of New York, or in the States of New York or New and agreements herein contained shall constitute valid and legally binding contracts Jersey are required or authorized by law or executive order to close, and (b) a day on between the Authority, on the one hand, and the Holders of the Notes, on the other which the New York Stock Exchange is closed. hand, and shall be enforceable by the holders of the Notes in the manner and to the extent herein provided. Default shall mean a Note Default.

Section 103. Definitions. Financial Consultant shall mean any financial advisor or firm of financial advisors of favorable local, regional or national reputation for skill and experience in performing (a) Capitalized terms used but not defined in this Resolution shall have the the duties for which a Financial Consultant is required by be employed pursuant to the meanings given to such terms in the Bond Resolution. In addition, in this Resolution, provisions hereof and who is retained by the Authority as a Financial Consultant for the the following terms shall have the meanings set forth below: purposes hereof.

Act shall mean the South Jersey Transportation Authority Act, Ch. 252, L. 1991, General Reserve Fund shall mean the General Reserve Fund established in as the same may be amended and supplemented from time to time. Section 5.02 of the Bond Resolution.

Authority shall mean the South Jersey Transportation Authority, a public body Government Obligations shall mean any noncallable (i) direct and general corporate and politic, with corporate succession, which pursuant to Section 4 of the Act obligations of, or any obligations guaranteed by, the United States of America, including constitutes an instrumentality of the State and in the exercise of the powers conferred but not limited to interest obligations of the Resolution Funding Corporation or any by the Act shall be deemed and held to be performing an essential governmental successor thereof, (ii) obligations of any state or political subdivision of a state function of the State. (“Refunded Bonds”) which are fully secured as to principal and interest by an irrevocable pledge of moneys or direct and general obligations of, or obligations Authorized Officer of the Authority the Chairman of the Authority, Vice Chairman guaranteed by, the United States of America, which moneys or obligations are of the Authority, the Executive Director of the Authority, the Treasurer of the Authority or segregated in trust and pledged for the benefit of the holders of the Refunded Bonds, such other officers or employees of the Authority authorized to perform specific acts or and (iii) certificates of ownership of the principal or interest of direct and general duties by the Authority's by-laws or by resolution who shall be designated to act on obligations of, or obligations guaranteed by, the United States of America, which

- 2- C-1 obligations are held in trust by a commercial bank which is a member of the Federal shall include individuals, firms, associations, corporations, governmental bodies and all Reserve System. other entities.

Holder or Holders shall mean the holder or holders, from time to time, of the Notes.

Note Default shall mean a Default specified in Section 701 hereof.

Notes shall mean the Taxable Subordinated Notes, Series 2007 to be issued by the Authority pursuant to this Resolution.

Outstanding shall mean, as of any date, Notes theretofore or thereupon being authenticated and delivered under this Resolution except (i) Notes canceled by the Authority at or prior to such date; (ii) Notes for the payment of which moneys, equal to the principal amount thereof and interest thereon to the date of maturity or redemption, shall be held under the Resolution and set aside for such payment (whether at or prior to the maturity or redemption date); (iii) Notes in lieu of or in substitution for which other notes shall have been authenticated and delivered pursuant to Article II of this Resolution; and (iv) Notes which have been defeased.

Payment Date shall mean the date on which the Notes become due and payable, whether at maturity or upon redemption prior to maturity.

Project Fund shall mean the fund so designated and established pursuant to Section 302 hereof.

Resolution shall mean this 2007 Subordinated Note Resolution.

Series Certificate shall mean a certificate executed by an Authorized Officer of the Authority making certain determinations in connection with the issuance of the Notes pursuant to this Resolution. Such Series Certificate, upon execution and delivery, shall be deemed to be a part of this Resolution.

Subordinated Debt Fund shall mean the Subordinated Debt Fund in Section 5.10 of the Bond Resolution.

Subordinated Debt Obligations shall mean the obligations of the Authority to pay the principal of and interest on Subordinated Indebtedness and any other payment obligations of the Authority under the terms of any Subordinated Indebtedness.

Subordinated Indebtedness shall mean indebtedness permitted to be issued by Sections 5.13 and 7.03 of the Bond Resolution, including without limitation, the Notes.

Underwriter shall mean Citigroup Global Markets Inc., appointed by the Authority pursuant to Section 501 hereof.

(b) Except where the context otherwise requires, words importing the singular number shall include the plural number and vice versa, and words importing persons

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moneys and securities from time to time held in the Subordinated Debt Fund and the ARTICLE II General Reserve Fund, subject and subordinate to the pledge thereof under the Bond Resolution and subject to the provisions of the Bond Resolution directing and permitting AUTHORIZATION OF NOTES the application thereof pursuant to Section 5.12(a) of the Bond Resolution and on the terms and conditions set forth in the Bond Resolution; and (iii) the Notes constitute Section 201. Authorization of Notes. Subordinated Indebtedness and are valid and binding obligations of the Authority as provided in this Resolution enforceable against the Authority in accordance with their Pursuant to the provisions of the Act and Sections 5.13 and 7.03 of the Bond respective terms and are entitled to the benefits of this Resolution and of the Act as of Resolution, the Authority hereby authorizes, approves and directs the issuance of the the date of such opinion, and the Notes have been duly and validly authorized and Notes in the maximum aggregate initial issuance amount of not exceeding $23,500,000. issued in accordance with law, including the Act as amended to the date of such The Notes shall bear interest at a fixed rate per annum to be determined by an opinion, and in accordance with this Resolution, provided that such opinion may take Authorized Officer of the Authority in a Series Certificate as provided in Section 504 exceptions, as to the enforceability of the Notes for bankruptcy and similar events and hereof, provided that the net interest cost on the Notes shall not exceed eight percent proceedings and for laws, judicial decisions and principles of equity affecting creditors' (8.0%) per annum. Subject to the redemption provisions contained herein and to be set rights generally and judicial discretion; forth in the Series Certificate, the Notes shall mature not later than thirty (30) months after the date of issuance of the Notes. The maturity date, aggregate principal amount, 3. An executed counterpart of the Series Certificate; and interest rate, purchase price and redemption provisions of the Notes shall be as determined by an Authorized Authority Official by Series Certificate pursuant to Section 4. Such further documents as may be required by general counsel or Bond 504, provided that (a) the Notes shall mature not later than thirty (30) months after the Counsel to the Authority. date of issuance of the Notes, (b) the aggregate principal amount of the Notes shall not exceed $23,500,000, (c) the net interest cost shall not exceed eight percent (8%), and Section 204. Determination in Accordance with Section 5.13(b) and 5.13(f) (d) no redemption premium shall be payable in connection with any optional redemption of the Bond Resolution. of the Notes. 1. The Authority covenants to provide sufficient monies to pay all debt Section 202. Purpose. The Authority shall issue the Notes for the purpose of service on the Notes when and as due. funding a project (collectively, “the Project”) consisting of: (i) the design of (a) a westbound third lane widening on the Atlantic City Express; and (b) an Express EZ- 2. The Authority finds and determines that the issuance of the Notes will not Pass at the Egg Harbor Toll Plaza on the Atlantic City Expressway; (ii) the construction impair the financial viability of the Authority and its operations. of a full interchange at the intersection of the Atlantic City Expressway and NJ State Route 50; (iii) to fund other capital improvements as shall be included in the Authority’s Section 205. Medium of Payment; Form and Date; Denominations; Letters capital plan for 2007-2011; (iv) the payment of capitalized interest on all or a portion of and Numbers; Interest. the Notes; and (v) the payment of certain costs of issuing the Notes. The Notes shall constitute Subordinated Indebtedness incurred for the purposes of Section 5.12(b)(3) of (a) The Notes shall be designated as, and shall be distinguished from other the Bond Resolution. The Project constitutes an Expressway Project which is hereby notes and bonds issued by the Authority by the title, “Taxable Subordinated Notes, designated as a “Pledged Project” under the Bond Resolution. Series 2007.” The Notes shall be issued in fully registered form in denominations of $5,000 or any integral multiple in excess thereof. Unless the Authority shall otherwise Section 203. Provisions for Issuance of the Notes. All (but not less than all) direct, the Notes shall be lettered and numbered from one upward preceded by the of the Notes shall be executed by the Authority for issuance under this Resolution and letter “R” prefixed to the number. Subject to the provisions of this Resolution, the form delivered to the Purchaser, but only upon the receipt by the Purchaser of: of the Notes shall be substantially in the form set forth in Exhibit A hereto.

1. A copy of the Bond Resolution and this Resolution, certified by an (b) The Notes shall be payable as to principal and interest in any coin or Authorized Officer of the Authority; currency which at the time of payment is legal tender for the payment of public and private debts upon presentation and surrender of the Notes at the office of Authority. 2. An opinion of Bond Counsel to the effect that (i) the Authority has the right and power to adopt this Resolution, and this Resolution has been duly and lawfully (c) The Notes shall be dated the date of initial issuance and delivery thereof adopted by the Authority, is in full force and effect and is valid and binding upon the and shall bear interest from their date. Authority in accordance with its terms, and no other authorization for this Resolution is required; (ii) this Resolution creates the valid pledge which it purports to create of the

- 5- - 6- C-2 Section 206. Execution. The Notes shall be executed in the name of the 1. The Notes are subject to redemption at the option of the Authority, at such Authority by the manual or facsimile signature of the Chairman, Vice Chairman or time or times and redemption prices, and upon such terms and conditions, as shall be Executive Director of the Authority and its official seal shall be impressed or reproduced set forth in a Series Certificate as provided in Section 504, provided that no redemption thereon and attested by the manual or facsimile signature of its Secretary or Treasurer. premium shall be payable in connection with any optional redemption of the Notes. In case the person serving in any such capacity ceases to hold such office before any Notes signed by such person shall have been delivered, such Notes may nevertheless 2. Notice of the call for redemption, identifying the Notes to be redeemed, be delivered as provided in this Resolution and may be issued as if the person who shall be given by the Authority or the Paying Agent on behalf of the Authority by mailing signed such Notes had not ceased to hold such office. a copy of the redemption notice by registered or certified mail at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption to the Holder of Section 207. Negotiability, Exchange, Transfer and Registry. each Note to be redeemed at the address shown on the registration books. Any notice mailed as provided in this Section shall be conclusively presumed to have been duly (a) The Notes shall be transferable only upon the books of the Authority, by given, whether or not the Holder receives the notice. If at the time of mailing of any the registered owner thereof in person or by his attorney duly authorized in writing, upon notice of redemption the Authority shall not have deposited with the Paying Agent surrender thereof together with a written instrument of transfer satisfactory to the moneys sufficient to redeem all the Notes called for redemption, such notice shall state Authority duly executed by the registered owner or his duly authorized attorney. Upon that it is subject to the deposit of the redemption moneys with the Paying Agent not later the transfer of any such registered Note, the Authority shall issue in the name of the than the opening of business on the redemption date and shall be of no effect unless transferee a new Note or Notes of the same aggregate principal amount as the such moneys are so deposited. surrendered Note or Notes. 3. Notice having been given in the manner provided in this Section 209, the (b) The registered Owner of any Note or Notes shall have the right to Notes shall become due and payable on the redemption date so designated at a exchange such Note or Notes for a new Note or Notes of any authorized denomination redemption price equal to the principal amount thereof, without premium, plus interest of the same aggregate principal amount as the surrendered Note or Notes. Such Note accrued and unpaid to the redemption date, and, upon presentation and surrender or Notes shall be exchanged by the Authority for a new Note or Notes upon the request thereof at the office specified in such notice, such Notes shall be paid at the redemption of the registered Owner thereof in person or by his attorney duly authorized in writing, price, plus interest accrued and unpaid to the redemption date. If, on the redemption upon surrender of such Note or Notes together with a written instrument requesting date, moneys for the redemption of all the Notes, together with interest to the such exchange satisfactory to the Authority duly executed by the registered owner or his redemption date, shall be held by the Paying Agent so as to be available therefor on duly authorized attorney. said date and, if notice of redemption shall have been given as aforesaid, then, from and after the redemption date, interest on the Notes shall cease to accrue and become (c) The Authority and the Paying Agent may deem and treat the person in payable. If said moneys shall not be so available on the redemption date, such Notes whose name any Note shall be registered upon the books of the Authority as the shall continue to bear interest until paid at the same rate as they would have borne had absolute owner of such Note, whether such Note shall be overdue or not, for the they not been called for redemption. purpose of receiving payment of, or on account of, the principal or redemption price of and interest on such Note and for all other purposes, and all such payments so made to 4. If at the time of mailing of any notice of redemption the Authority shall not any such registered owner or upon his order shall be valid and effectual to satisfy and have deposited with the Trustee moneys sufficient to redeem all the Notes called for discharge the liability upon such Note to the extent of the sum or sums so paid, and the redemption, such notice shall state that it is subject to the deposit of the redemption Authority and the Paying Agent shall not be affected by any notice to the contrary. moneys with the Trustee not later than the opening of business on the redemption date and shall be of no effect unless such moneys are so deposited. Section 208. Notes Mutilated, Destroyed, Stolen or Lost. If any Note becomes mutilated or is lost, stolen or destroyed, the Authority may execute and deliver Section 210. Receipt of Prior Approval Letters. a new Note of like principal amount, as the Note so mutilated, lost, stolen or destroyed, provided that (i) in the case of any such mutilated Note, such Note is first surrendered to The Authority hereby acknowledges receipt of prior approval letters of the the Authority, (ii) in the case of any such lost, stolen or destroyed Note, there is first Governor and the Treasurer as required by Section 14 of the Act approving the adoption furnished evidence of such loss, theft or destruction satisfactory to the Authority, by the Authority of this Resolution and the issuance of the Notes. together with indemnity satisfactory to the Authority, and (iii) all expenses in connection with such transaction are paid by the Holder of any such Notes. Section 211. Appointment of Paying Agent.

Section 209. Optional Redemption of Notes.

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The Bank of New York, West Paterson, New Jersey, is hereby appointed as Paying Agent for the Notes. In case The Bank of New York shall cease or fail to act as ARTICLE III such for any reason, an Authorized Officer of the Authority is hereby authorized to select and alternate entity meeting the qualifications of a Paying Agent under the Bond PLEDGE EFFECTED BY THE RESOLUTION; Resolution to serve as Paying Agent hereunder. FUNDS AND ACCOUNTS

Section 301. Pledge Effected by the Resolution.

1. The Notes are special, limited obligations of the Authority payable solely from the moneys and securities from time to time on deposit in the Subordinated Debt Fund and the General Reserve Fund pursuant to the terms of the Bond Resolution and subject to Section 5.12(a) of the Bond Resolution. There are hereby pledged and assigned as security for the payment of the Notes, in accordance with the terms and provisions of the Notes and this Resolution, all of the moneys and securities from time to time on deposit in the Subordinated Debt Fund and the General Reserve Fund subject only to Section 5.12(a) of the Bond Resolution and pursuant to the terms of the Bond Resolution.

THE NOTES ARE PAYABLE SOLELY FROM THE PROPERTY PLEDGED TO THE PAYMENT OF THE NOTES AS CONTAINED IN THIS RESOLUTION, AND NEITHER THE STATE OF NEW JERSEY NOR ANY INSTRUMENTALITY THEREOF, OTHER THAN THE AUTHORITY (TO THE LIMITED EXTENT SET FORTH HEREIN), IS OBLIGATED TO PAY THE NOTES AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NEW JERSEY OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE NOTES. THE AUTHORITY HAS NO TAXING POWER.

2. All moneys and securities from time to time on deposit in the Subordinated Debt Fund and the General Reserve Fund shall immediately be subject to the lien of this pledge without any physical delivery thereof or further act, and the lien of the pledge created hereby shall be valid and binding as against all persons having claims of any kind in tort, contract or otherwise, against the Authority, irrespective of whether such persons have notice thereof.

3. The Notes shall be subordinate in all respects to the provisions of the Bond Resolution and the lien and pledge created by the Bond Resolution in favor of the Bonds and Qualified Swap Obligations.

4. All Principal Installments and interest on the Bonds and all Qualified Swap Obligations must be paid before any further payment of principal or interest on the Notes, if any of the following events occur:

(a) an Event of Default under the Bond Resolution resulting from the non-payment of Principal Installments or interest on the Bonds (until cured).

- 9- - 10 - C-3 (b) an Event of Default under the Bond Resolution with respect to any one or more Series of Bonds resulting in an acceleration of Principal Installments and ARTICLE IV interest thereon. DEFEASANCE (c) The Authority becomes insolvent. Section 401. Defeasance of Notes. Any Default under this Resolution or the Notes shall not in itself create the right to declare an Event of Default under the Bond Resolution. The Notes may not be (a) If the Authority shall pay or cause to be paid, or there shall otherwise be accelerated unless the Bonds are accelerated. paid, to the Holders of all Notes the principal or redemption price and interest due or to become due thereon, at the times and in the manner stipulated in the Notes and in this Section 302. Project Fund. There is hereby established with the Authority a Resolution, then the pledge of the amounts on deposit in the Subordinated Debt Fund trust fund designated “Project Fund.” The Authority shall deposit the proceeds from the and the General Reserve Fund and all covenants, agreements and other obligations of sale of the Notes into the Project Fund. Moneys held in the Project Fund shall be applied the Authority to the Holders shall thereupon cease, terminate and become void and be by the Authority to pay the costs of the Project, including capitalized interest, if any, and discharged and satisfied. certain costs of issuance of the Notes. Any proceeds of the Notes not applied as aforesaid may be transferred to either (i) the Subordinated Debt Fund and applied to pay a portion of (b) Notes for the payment of which moneys shall have been set aside and the principal of or interest on the Notes when due, either at maturity or upon redemption shall be held in trust by the Paying Agent (through deposit by the Authority of funds for prior to maturity, or (ii) the Revenue Fund established under the Bond Resolution and such payment or otherwise) at the maturity or redemption date thereof shall be deemed applied to any other purpose. Moneys on deposit in the Project Fund may be invested in to have been paid within the meaning and with the effect expressed in subsection (a) of Investment Securities which mature on or before the dates when such moneys are this Section. Any outstanding Notes shall prior to the maturity or redemption date expected to be needed for the purposes set forth herein. thereof be deemed to have been paid within the meaning and with the effect expressed in subsection (a) of this Section if there shall have been deposited with the Paying Agent therefor either moneys in an amount which shall be sufficient or Government Obligations (including any Government Obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States) the principal or redemption price of and the interest on which when due and without reinvestment thereof will provide moneys which, together with the moneys, if any, deposited with the Paying Agent at the same time, shall be sufficient to pay when due the principal or redemption price and interest due on said Notes on or prior to the maturity or redemption date thereof. Neither Government Obligations nor moneys deposited with the Paying Agent pursuant to this Section nor principal or interest payments on any such Government Obligations shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal or redemption price of and interest on said Notes, provided that any cash received from such principal or interest payments on such Government Obligations deposited with the Paying Agent which will not be required at any time for such purpose, as evidenced by a verification report issued by a firm of certified public accountants or financial advisors shall first be paid by the Paying Agent to the Authority, free and clear of any trust, lien or pledge securing said Notes or otherwise existing under this Resolution. To the extent such cash will be required for such purpose at a later date, such cash shall, to the extent practicable, be reinvested in Government Obligations maturing at times and in amounts sufficient to pay when due the principal or redemption price of and interest to become due on said Notes on the maturity or redemption date thereof, and interest earned from such reinvestment shall be paid over to the Authority, as received by the Paying Agent, free and clear of any trust, lien, pledge or assignment securing said Notes or otherwise existing under this Resolution.

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Statement as an Authorized Officer of the Authority shall approve, with the advice of ARTICLE V Bond Counsel, is hereby authorized. Any Authorized Officer of the Authority is further authorized to take all such other actions as such Authorized Officer of the Authority shall ADDITIONAL DETERMINATIONS AND PROCEEDINGS deem necessary or desirable to effect the issuance and sale of the Notes.

Section 501. Authorization of Negotiated Note Sale; Appointment of Section 504. Rule 15c2-12. The Continuing Disclosure Agreement, Underwriter; Approval of Purchase Contract; Selection of Underwriter; substantially in the form presented to this meeting, is hereby approved; provided, that Determination Under Executive Order No. 26. an Authorized Officer of the Authority is hereby authorized with the advice of Bond Counsel, to make such changes and insertions to and omissions from such form as (a) In accordance with the State of New Jersey Executive Order No. 26 such Authorized Officer of the Authority may deem necessary or appropriate. The signed by Governor Christine Todd Whitman (1994) (“Executive Order No. 26), the Authorized Officers of the Authority are hereby authorized, with the advice of Bond Authority hereby appoints Citigroup Global Markets Inc. as Underwriter for the Notes. Counsel, to execute such documents and instruments relating to continuing disclosure, if any as may be necessary or desirable to enable brokers, dealers and municipal (b) The purchase of the Notes by the Underwriter and the sale of the Notes by securities dealers to comply with Rule 15c2-12 promulgated under the Securities the Authority to the Underwriter shall be subject to the execution by the Authority and Exchange Act of 1934, as amended. the Underwriter of a Bond Purchase Contract (the “Purchase Contract”) in substantially the form presented to this meeting. The Purchase Contract, in substantially the form Section 505. Additional Proceedings. As additional proceedings of the presented to this meeting, is hereby approved; provided, that an Authorized Officer of Authority in connection with the execution and delivery of the Notes, there is hereby the Authority is hereby authorized, with the advice of Bond Counsel, to make such delegated to any Authorized Officer of the Authority the power to take the following changes, insertions and deletions to and omissions from such form as may be actions and make the following determinations by Series Certificate signed by such necessary or appropriate. The Authorized Officers of the Authority are each hereby Authorized Officer of the Authority: authorized, in consultation with Bond Counsel, to negotiate the terms of the Purchase Contract. The Authorized Officers of the Authority are, and each such Authorized 1. To execute, deliver and perform the Notes. Officer of the Authority is, hereby authorized on behalf of the Authority to approve the terms of the Purchase Contract relating to the sale of the Notes and to execute and 2. To determine, subject to the provisions of this Resolution, the maturity deliver such Purchase Contract to the Underwriter; provided, that the provisions of the date, aggregate principal amount, interest rate, purchase price, and redemption Purchase Contract are acceptable to counsel to the Authority (including Bond Counsel) provisions of the Notes and any other provisions deemed advisable by such Authorized and the conditions set forth in Section 504 hereof are met. Officer not in conflict with or in substitution for the provisions of this Resolution, provided that (a) the Notes shall mature not later than thirty (30) months after the date of (c) In accordance with Executive Order No. 26, the Authority has determined issuance of the Notes, (b) the aggregate principal amount of the Notes shall not exceed that the Notes will be sold in accordance with the Purchase Contract pursuant to a $23,500,000, (c) the net interest cost shall not exceed eight percent (8%), and (d) no “negotiated sale” and that such negotiated sale is permissible as a result of the complex redemption premium shall be payable in connection with any optional redemption of the financing structure and volatile interest rate conditions. Notes.

Section 502. Approval of Preliminary Official Statement. The preliminary 3. To execute a final Official Statement of the Authority, substantially in the official statement relating to the offering of the Notes (the “Preliminary Official form of the Preliminary Official Statement, with such insertions, revisions and omissions Statement”), substantially in the form presented to this meeting, is hereby approved; as may be authorized by the Authorized Officer of the Authority executing the same, provided, that an Authorized Officer of the Authority is hereby authorized, with the with the advice of Bond Counsel, to deliver the final Official Statement to the advice of Bond Counsel, to make such changes and insertions to and omissions from Underwriters and to authorize the use of the final Official Statement and the information such form as may be necessary or appropriate. An Authorized Officer of the Authority is contained therein in connection with the offering and sale of the Notes. hereby authorized, with the advice of Bond Counsel, to deem the Preliminary Official Statement final within the meaning of Rule 15c2-12 promulgated under the Securities 4. To select a firm to act as its broker to solicit bids, to enter into one or more Exchange Act of 1934, as amended, and to provide written evidence relating thereto in repurchase agreements and to purchase other Investment Securities, in the event that form acceptable to Bond Counsel. such Authorized Officer of the Authority determines, with the advice of Bond Counsel, that it is advantageous to the Authority to invest any proceeds of the Notes pursuant to Section 503. Authorization of Distribution of Preliminary Official Statement. such repurchase agreement(s) and/or other Investment Securities. The distribution in connection with the sale of the Notes of the Preliminary Official Statement, with such changes, insertions and omissions in the Preliminary Official

- 13 - - 14 - C-4 5. To purchase a municipal bond insurance policy or policies with respect to any or all of the maturities of the Notes if an Authorized Officer of the Authority, with the ARTICLE VI advice of Bond Counsel, determines that such policy or policies of municipal insurance is necessary or desirable, to include in the Series Certificate such provisions relating to COVENANTS OF THE AUTHORITY the insurance policy or policies as such Authorized Officer of the Authority, with the advice of Bond Counsel, deems appropriate, and to include on the form of any Notes Section 601. Payment of Notes. The Authority shall, out of the amounts on that is insured by a municipal bond insurance policy a statement of insurance in the deposit in the Subordinated Debt Fund and the General Reserve Fund, duly and form requested by the issuer of such municipal bond insurance policy. punctually pay or cause to be paid all the principal of and interest on the Notes in full, at the dates and place and in the manner set forth herein and in the Notes and shall duly 6. To enter into a Credit Facility with respect to any or all of the maturities of and punctually perform all of its other obligations hereunder and thereunder. the Notes if an Authorized Officer of the Authority, with the advice of Bond Counsel, determines that such Credit Facility is necessary or desirable, and to include in the Section 602. Incorporation of Bond Resolution Covenants. Subject to Series Certificate such provisions relating to such Credit Facility as such Authorized Section 603 below, all of the Authority covenants set forth in Article VII of the Bond Officer of the Authority, with the advice of Bond Counsel, deems appropriate. Resolution are hereby incorporated into this Resolution by reference as if set forth in full. 7. Prior to the issuance of the Notes, to make such revisions to this Resolution as may be requested by Fitch, Moody’s and/or S&P in connection with their Section 603. Additional Covenant With Respect to Balloon Indebtedness. respective ratings of the Notes, or by a Credit Issuer or by the issuer of any municipal With respect to Section 7.08 of the Bond Resolution, the following provision shall apply bond insurance policy insuring any of the Notes, with the advice of Bond Counsel; with respect to Balloon Indebtedness. provided, that such revisions, if any, shall be memorialized in the Series Certificate for (a) During the annual period preceding the final maturity date of such Balloon the Notes. Indebtedness, all of the principal thereof shall be considered to be due on the maturity 8. To make such other determinations, to execute such other documents, or due date of such Balloon Indebtedness unless the Authority provides to the Trustee, instruments and papers and to do such acts and things as may be necessary or prior to the beginning of such annual period, a certificate of a Financial Consultant advisable in connection with the execution, delivery and performance of the Notes and certifying that, in its judgment, taking into consideration the completion of any are not inconsistent with the provisions of this Resolution. uncompleted projects and the issuance of future Bonds if necessary to finance the completion of such uncompleted project, the Authority will be able to refund such All matters determined by an Authorized Officer of the Authority under the Balloon Indebtedness through the issuance of Bonds, in which event the Balloon authority of this Resolution shall constitute and be deemed matters incorporated into Indebtedness shall be amortized over the term of such proposed refunding Bonds and this Resolution and approved by the Authority, and whenever an Authorized Officer of shall be deemed to bear the interest rate specified in the certificate of the Financial the Authority is authorized or directed to take any action pursuant to this Resolution with Consultant. or upon the advice, consent or consultation with or by any other person, agency, office or official, a certificate of such Authorized Officer of the Authority may be conclusively Section 604. Covenant With Respect to Issuance of Bonds other than relied upon as being determinative that such advice, consultation or consent has in fact Refunding Bonds. The Authority shall not issue any Bonds other than Refunding occurred and that such actions of the Authorized Officer of the Authority are valid and Bonds while any obligations are outstanding under the Notes; provided, however, that binding. the Authority shall not issue Refunding Bonds to refund the Notes unless all such Notes are refunded.

- 15 - - 16 -

ARTICLE VII ARTICLE VIII

DEFAULTS AND REMEDIES [INTENTIONALLY OMITTED]

Section 701. Defaults.

Each of the following shall be a Note Default hereunder:

(a) failure to pay any principal or interest under the Notes when due; or

(b) the default by the Authority in the performance of any of its obligations under this Resolution (except as set forth in (a) above) and the failure to cure same within sixty (60) days after any Authorized Officer of the Authority shall have received notice thereof as provided in the Bond Resolution or by the Holders of not less than twenty-five (25%) per cent in aggregate principal amount of the Notes.

Section 702. Remedies.

(a) Upon the occurrence of a Note Default, the Holders of not less than twenty-five (25%) per cent in aggregate principal amount of the Notes shall have the right to specifically enforce the obligations of the Authority hereunder by any appropriate action or proceeding.

(b) No remedy herein conferred is intended to be exclusive of any other remedy or remedies, and each remedy is in addition to every other remedy given hereunder or now or hereafter existing at law or in equity.

Section 703. Limitations on Remedies. Notwithstanding any other provisions contained in this Resolution, the Notes may not be accelerated unless the Bonds are accelerated.

- 17 - - 18 - C-5 rights of the Holders of the Notes then Outstanding under this Resolution. Each ARTICLE IX Supplemental Resolution making any such amendment shall become effective upon the filing of a copy thereof with the secretary of the Authority together with the Opinion of SUPPLEMENTAL RESOLUTIONS Bond Counsel required by Section 903 of the Resolution.

Section 901. Supplemental Resolutions Effective Without Consent of Section 902. Supplemental Resolutions Effective with Consent of Noteholders. Prior to the time of issuance of the Notes, the Authority may enter into a Noteholders. At any time or from time to time, a Supplemental Resolution may be Supplemental Resolution for any purpose deemed by the Authority to be appropriate, adopted subject to consent by the Holders in accordance with and subject to the and any such Supplemental Resolution shall be deemed to have constituted part of this provisions of Article X, which Supplemental Resolution, upon compliance with the Resolution as originally adopted. The following provisions of this Section 901 and the provisions of said Article X, shall become fully effective in accordance with its terms as provisions of Sections 902 and 903 shall become effective at such time as the Notes provided in said Article X. are issued and become Outstanding hereunder. For any one or more of the following purposes and at any time or from time to time, a Supplemental Resolution may be Section 903. General Provisions. adopted by the Authority without the consent of the Holders which shall be fully effective in accordance with its terms: (a) This Resolution shall not be modified or amended in any respect except as provided in and in accordance with and subject to the provisions of this Article IX and (a) To close this Resolution against, or provide limitations and restrictions in Article X. addition to the limitations and restrictions contained in this Resolution on, the authentication and delivery of Notes; (b) Every Supplemental Resolution shall be accompanied by an Opinion of Bond Counsel stating that such Supplemental Resolution has been duly and lawfully (b) To add to the covenants and agreements of the Authority in this adopted in accordance with the provisions of this Resolution, is authorized or permitted Resolution, other covenants and agreements to be observed by the Authority which are by this Resolution and is valid and binding upon the Authority and is enforceable in not contrary to or inconsistent with this Resolution as theretofore in effect; accordance with its terms. (c) To add to the limitations and restrictions in this Resolution other limitations and restrictions to be observed by the Authority which are not contrary to or inconsistent with this Resolution as theretofore in effect;

(d) To modify any of the provisions of this Resolution in any respect so as to obtain a Letter of Credit;

(e) To confirm, as further assurance, any pledge or lien created or to be created by this Resolution and to pledge any additional revenues, moneys or securities as security for the payment of the principal or redemption price of and interest on the Notes, when due;

(f) To cure any ambiguity or defect or inconsistent provision in this Resolution or to insert such provisions clarifying matters or questions arising under this Resolution as are necessary or desirable if any such modifications are not contrary to or inconsistent with this Resolution as theretofore in effect;

(g) To make such changes to this Resolution as may be requested or required by any Rating Agency then rating the Notes, all as may be approved by such Authorized Officer of the Authority, with the advice of general counsel to the Authority and Bond Counsel; and

(h) To modify any of the provisions of this Resolution in any other respect whatsoever, provided that such modification shall not materially adversely affect the

- 19 - - 20 -

after the Holders of the required percentages of Notes shall have filed their consents ARTICLE X to the Supplemental Resolution, notice stating in substance that the Supplemental Resolution (which may be referred to as a Supplemental Resolution adopted by the AMENDMENTS Authority on a stated date, a copy of which is on file with the Authority) has been consented to by the Holders of the required percentages of Notes and will be effective Section 1001. Mailing. Any provision in this Article for the mailing of a notice or as provided in this Section 1003, may be given to Holders by the Authority by mailing other paper to Holders shall be fully complied with if it is mailed postage prepaid to such notice to Holders (but failure to mail such notice shall not prevent such each registered owner of Notes then outstanding at his address, if any, appearing Supplemental Resolution from becoming effective and binding as in this Section 1003 upon the registration books of the Authority. provided). Such Supplemental Resolution making such amendment or modification shall be deemed conclusively binding upon the Authority and the Holders of all Notes Section 1002. Power of Amendment. Except as otherwise provided by at the expiration of seven days after the mailing of such last mentioned notice, except Section 901, any modification or amendment of this Resolution and of the rights and in the event of a final decree of a court of competent jurisdiction setting aside such obligations of the Authority and of the Holders of the Notes hereunder, in any Supplemental Resolution in a legal action or equitable proceeding for such purpose particular, may be made by a Supplemental Resolution, with the written consent given commenced within such seven-day period; provided, however, that the Authority as provided in Section 1003 of this Resolution of the Holders of at least a majority in during such seven-day period and any such further period during which any such principal amount of the Notes Outstanding at the time such consent is given. No such action or proceeding may be pending shall be entitled in its absolute discretion to take modification or amendment shall permit a change in the terms of redemption or such action, or to refrain from taking such action, with respect to such Supplemental maturity of the principal of any Outstanding Note or of interest thereon or a reduction Resolution as it may deem expedient. in the principal amount thereof or in the rate of interest thereon without the consent of the Holder of such Note, or shall reduce the percentages or otherwise affect the Section 1004. Modifications by Unanimous Consent. Except as otherwise classes of Notes the consent of the Holders of which is required to effect any such provided by Section 901, the terms and provisions of this Resolution and the rights and modification or amendment other than in accordance with the provisions of this obligations of the Authority and the Holders of the Notes hereunder may be modified or Resolution. amended in any respect upon the adoption by the Authority of a Supplemental Resolution and the consent of the Holders of all of the Notes, such consent to be given Section 1003. Consent of Noteholders. The Authority may at any time adopt as provided in Section 1003 except that no notice to Holders shall be required. a Supplemental Resolution making a modification or amendment permitted by the provisions of Section 1002 to take effect when and as provided in this Section 1003. Section 1005. Exclusion of Notes. Notes owned or held by or for the account A copy of such Supplemental Resolution (or brief summary thereof or reference of the Authority shall not be deemed Outstanding for the purpose of consent or other thereto), together with a request to Holders for their consent thereto, shall be mailed action or any calculation of Outstanding Notes provided for in this Article X, and the by the Authority to Holders (but failure to mail such copy and request shall not affect Authority shall not be entitled with respect to such Notes to give any consent or take any the validity of the Supplemental Resolution when consented to as in this Section 1003 other action provided for in this Article. provided). Such Supplemental Resolution shall not be effective unless and until (i) there shall have been received by the Authority (a) the written consents of Holders of the percentages of Outstanding Notes specified in Section 1002 and (b) an Opinion of Bond Counsel stating that such Supplemental Resolution has been duly and lawfully adopted by the Authority in accordance with the provisions of this Resolution, is authorized or permitted by this Resolution and is valid and binding upon the Authority and is enforceable in accordance with its terms, and (ii) a notice shall have been given, as hereinafter in this Section 1003 provided. Each such consent shall be effective only if accompanied by proof of the holding, at the date of such consent, of the Notes with respect to which such consent is given. Any such consent shall be binding upon the Owner of the Notes giving such consent and upon any subsequent Holder of such Notes and of any Notes issued in exchange therefor (whether or not such subsequent Owner thereof has notice thereof) unless such consent is revoked in writing by the Holder of such Notes giving such consent or a subsequent Holder thereof by filing with the Authority, prior to the time when the notice of the Authority hereinafter in this Section 1003 provided for is mailed, such revocation. At any time

- 21 - - 22 - C-6 If to the Authority: Mail Only: ARTICLE XI South Jersey Transportation Authority P.O. Box 351 MISCELLANEOUS Hammonton, New Jersey 08037 Attn: Executive Director Section 1101. Parties Interested. Nothing contained in this Resolution, express or implied, is intended or shall be construed to confer upon or give to any Deliveries: person, firm or corporation, other than the Authority, the Paying Agent and the Holders South Jersey Transportation Authority from time to time of the Notes any right, remedy or claim under or by reason of this Farley Service Plaza Resolution or any covenant, condition or stipulation hereof; and the covenants, Milepost 21.3 stipulations and agreements in this Resolution contained are and shall be for the sole Elwood, New Jersey 08217 and exclusive benefit of the Authority, the Paying Agent and the Holders from time to Attn: Executive Director time of the Notes and their respective successors and assigns. Tel: (609) 965-6060 Section 1102. No Personal Recourse. No covenant or agreement contained in Fax: (609) 965-7315 this Resolution or in the Notes shall be deemed to be the covenant or agreement of any member, officer, agent or employee of the Authority in his or her individual capacity. No If to the Paying Agent: The Bank of New York recourse shall be had for the payment of the principal of or interest on the Obligation of 385 Rifle Camp Road the Authority under the Notes or for any claim based thereon or on this Resolution Corporate Trust - 3rd Floor against the Authority or any member, officer, agent or employee, past, present or future West Paterson, New Jersey 07424 of the Authority, or of any successor corporation, as such, either directly or through the Attn: Linda Corvo, Asst. Vice President Authority or any such successor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or Tel: 973-357-7812 otherwise, all such liability of such members, officers, agents or employees being Fax: 973-357-7840 released as a condition of and as material consideration for the adoption by the Authority of this Resolution and the issuance of the Notes. or at such other address as may be filed in writing by the Authority and the Paying Section 1103. Successors and Assigns. All the covenants, promises and Agent. agreements in this Resolution contained by or on behalf of the Authority shall bind and. Section 1106. Descriptive Headings. The descriptive headings of the Articles inure to the benefit of their respective successors and assigns, whether or not so and Sections of this Resolution are inserted for convenience of reference only and shall expressed. not control or affect the meaning or construction of any of the provisions hereof. Section 1104. Effect of Invalid Provisions. If any one or more of the Section 1107. Governing Law. This Resolution and the Notes shall be provisions of this Resolution shall, for any reason, be held to be illegal or invalid, such governed by the laws of the State. illegality or invalidity shall not affect any other provisions of this Resolution, but this Resolution shall be construed and enforced as if such illegal or invalid provisions had Section 1108. Effective Date. This Resolution shall take effect upon its not been contained herein or therein. adoption in accordance with the Act. Section 1105. Notices. Any notice to, or other instrument to be filed with, or demand upon the Authority and the Paying Agent shall be deemed to have been sufficiently given or served, presented or made by being hand-delivered or sent by confirmed fax, registered or certified United States mail or overnight courier service addressed to the Authority and the Paying Agent as follows:

- 23 - - 24 -

EXHIBIT A THAN THE AUTHORITY AND SHALL NOT CREATE OR CONSTITUTE ANY INDEBTEDNESS, LIABILITY OR OBLIGATION OF THE STATE OF NEW JERSEY OR (NOTE TEXT - FACE OF NOTE) OF ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE AUTHORITY OR BE OR CONSTITUTE A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF NEW $______JERSEY OR OF ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE STATE OF NEW JERSEY NOR ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE AUTHORITY IS OBLIGATED TO PAY THE PRINCIPAL OR REDEMPTION PRICE OF UNITED STATES OF AMERICA OR INTEREST ON THIS NOTE AND NEITHER THE FAITH AND CREDIT NOR THE STATE OF NEW JERSEY TAXING POWER OF THE STATE OF NEW JERSEY OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR SOUTH JERSEY TRANSPORTATION AUTHORITY REDEMPTION PRICE OF OR INTEREST ON THIS NOTE. THIS NOTE IS A SPECIAL, TAXABLE SUBORDINATED NOTES, SERIES 2007 LIMITED OBLIGATION OF THE AUTHORITY, PAYABLE SOLELY OUT OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY No. R- PLEDGED UNDER THE RESOLUTION AND FROM ANY AMOUNTS OTHERWISE AVAILABLE UNDER THE RESOLUTION FOR THE PAYMENT OF THE NOTES. THE Interest Dated Maturity AUTHORITY HAS NO TAXING POWER. Rate Date Date % It is hereby certified and recited that all conditions, acts and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of this Note, exist, have happened and have been performed, and that the Principal Amount: issuance of this Note is within every debt and other limit prescribed by the laws of the State of New Jersey. Registered Owner: THE TERMS AND PROVISIONS OF THIS NOTE ARE CONTINUED ON THE SOUTH JERSEY TRANSPORTATION AUTHORITY (“Authority”), a public body FOLLOWING PAGES HEREOF AND SUCH CONTINUED TERMS AND PROVISIONS politic and corporate and an instrumentality of the State of New Jersey organized under SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET the South Jersey Transportation Authority Act, Chapter 251 of the Laws of 1991 of the FORTH IN THIS PLACE. State of New Jersey (“Act”), for value received, hereby promises to pay to the Registered Owner of this note (“Note”), on the maturity date hereof in accordance with the terms hereof and of the within mentioned Resolution, but only from the revenues, moneys and funds pledged under the Resolution, upon surrender hereof, the Principal Amount set forth above, and interest on said Principal Amount hereinafter provided. Interest shall accrue on the Principal Amount from the Dated Date set forth above until and including the Maturity Date set forth above. The Principal Amount hereof, together with all interest accrued thereon, is payable on the Maturity Date, but only to the extent that moneys are available therefor under the Resolution on the Maturity Date.

The Principal Amount and interest so payable and punctually paid or provided for on the Maturity Date will be paid, upon surrender hereof, at the corporate trust office of the Paying Agent under the Resolution hereinafter mentioned to the person in whose name this Note is registered (“Registered Owner”) on the note register maintained by the Authority (“Note Register”). Principal of and interest on this Note shall be payable in any coin or currency of the United States of America which at the time of payment thereof is legal tender for the payment of public and private debts therein.

THIS NOTE SHALL NOT BE IN ANY WAY A DEBT OR LIABILITY OF THE STATE OF NEW JERSEY OR OF ANY POLITICAL SUBDIVISION THEREOF OTHER

C-7 26 (CONTINUATION OF NOTE TEXT) IN WITNESS WHEREOF, SOUTH JERSEY TRANSPORTATION AUTHORITY has caused this Note to be executed in its name and on its behalf by the signature of its Chairman, Vice Chairman or Executive Director and its official seal to be impressed or This Note is one of a duly authorized issue of Notes of the Authority, known as reproduced hereon and attested by the signature of its Secretary, all as of the Dated “Taxable Subordinated Notes, Series 2007”, in the aggregate initial issuance amount of Date set forth above. $______, all of like tenor, and all issued under and equally and ratably secured by a resolution of the Authority titled “2007 Subordinated Note Resolution”, adopted June 19, SOUTH JERSEY TRANSPORTATION 2007 (the “Resolution”). AUTHORITY Reference is hereby made to the Resolution for descriptions of the sources of payment for the Notes, the nature, extent and manner of enforcement of remedies, the terms and conditions under which the Resolution may be amended or modified, the BY: rights and limitations thereon of the Registered Owners of the Notes, and the terms and conditions under which the Notes are issued and to all of the terms of the other (SEAL) financing documents in respect of the Notes as listed in the Closing Agenda in respect of the Notes, and of the Act, reference to each of which is hereby made. True copies of ATTEST: the Act and executed counterparts of the Resolution and the other such financing documents are on file and available for inspection at the principal corporate trust office of the Authority. All capitalized terms used but not defined in this Note shall have the By: meanings given to them in the Resolution. The Act and the Resolution are incorporated ,Secretary herein by reference as if set forth in full. By acceptance of this Note (including receipt of a book-entry credit evidencing an interest herein), each registered and beneficial owner hereof shall be deemed to assent to all of the provisions thereof as an explicit and material portion of the consideration running to the Authority to induce it to adopt the Resolution and issue this Note.

The Notes are subject to redemption at the option of the Authority, in whole but not in part, at any time on or after ______, at a redemption price equal to the Principal Amount thereof, without premium, plus accrued interest to the redemption date.

The Notes shall be subordinate in all respects to the provisions of the Bond Resolution and the lien and pledge created by the Bond Resolution in favor of the Bonds.

All Principal Installments and interest on the Bonds and all Qualified Swap Obligations must be paid before any further payment of principal or interest on the Notes, if any of the following events occur:

(a) an Event of Default under the Bond Resolution resulting from the non-payment of Principal Installments or interest on the Bonds (until cured).

(b) an Event of Default under the Bond Resolution with respect to any one or more Series of Bonds resulting in an acceleration of Principal Installments and interest thereon.

(c) The Authority becomes insolvent.

27 28

Any Default under the Resolution or the Notes shall not in itself create the right to FORM OF ASSIGNMENT declare an Event of Default under the Bond Resolution. The Notes may not be accelerated unless the Bonds are accelerated. For value received, the undersigned hereby sells, assigns and transfers unto ______the within Note and all rights thereunder, and hereby irrevocably This Note is fully registered in the name of the Registered Owner on the Note constitutes and appoints ______, attorney, to transfer the said Note on the Register kept at the offices of the Authority, such registration to be noted hereon by the Note Register, with full power of substitution in the premises. Authority. No transfer shall be valid as against the Authority made by the Registered Owner in person or by his duly authorized attorney or legal representative and similarly noted upon the Note Register and hereon. Upon any such transfer or exchange, the Dated: Authority shall issue to or upon the order of the Registered Owner, a new registered Note or Notes, in authorized denominations aggregating the Principal Amount hereof, Signature guaranteed: maturing on the same date, bearing interest at the same rate, bearing the same series NOTICE: The assignor's signature to designation as this Note and registered in such names as shall be requested. Such this Assignment must correspond with transfers and exchanges shall be without cost to Registered Owners of the Notes, but the name as it appears on the face of such Registered Owners shall be required to pay any taxes or assessments levied or thewithinNoteineveryparticular imposed thereon. without alteration or any change whatever. Signature must be The Authority and the Paying Agent may treat the person in whose name this guaranteed by a member firm of the Note is registered as the absolute owner of this Note for all purposes whether or not this New York Stock Exchange or by a Note shall be overdue, and neither the Authority nor the Paying Agent shall be affected commercial bank or trust company. by any notice to the contrary. All payments of the principal and interest made to the Registered Owner hereof in the manner set forth herein and in the Resolution shall be valid and effectual to satisfy and discharge the liability upon this Note to the extent of the sum or sums so paid, whether or not notation of the same be made hereon, and any consent, waiver or action taken by such Registered Owner pursuant to the provisions of CHERRY_HILL\375005\5 192891.000 the Resolution shall be conclusive and binding upon such Registered Owner, his heirs, successors and assigns, and upon all transferees hereof, whether or not notation thereof be made hereon or on any Note issued in exchange herefor.

No recourse shall be had for the payment of the Principal of or interest on this Note, or for any claim based hereon or on the Resolution or any resolution supplemental thereto, against any member, officer or employee, past, present or future, of the Authority, or of any successor corporation, as such, either directly or through the Authority or any such successor corporation, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability of such members, officers or employees being released as a specific condition of and as material consideration for the adoption of the Resolution and the issuance of the Notes.

29 C-8 30 APPENDIX D

TRAFFIC STUDY [THIS PAGE INTENTIONALLY LEFT BLANK] 900 Chapel Street Suite 1400 New Haven, CT 06510 (203) 865-2191 (203) 624-0484 fax www.wilbursmith.com

June 27, 2007

Ms. Kathleen Sharman Director of Finance South Jersey Transportation Authority P. O. Box 351 Hammonton, New Jersey 08037

Dear Ms. Sharman:

Wilbur Smith Associates (WSA) is pleased to submit this report which presents a forecast of transaction and revenue (toll and concession) potential for the Atlantic City Expressway (ACE). As requested by the South Jersey Transportation Authority (SJTA), the WSA forecast period begins in 2008 and extends to 2017. The forecast accounts for a variety of factors which might impact travel patterns within the ACE corridor. A few of these factors include major capital and operating improvements anticipated within the corridor and planned economic/land-use developments that are expected to occur within the forecast period in the region.

To conduct this study, WSA utilized the extensive traffic and economic databases which WSA has amassed for the State of New Jersey as part of the ongoing retainer services contracts WSA has with the SJTA and the New Jersey Turnpike Authority (NJTA). The 10-year forecast uses the recently completed 18-month forecast of transactions and toll revenue for the ACE. The 18-month forecast, which was submitted to the SJTA on October 11, 2006, was based on a toll schedule which eliminated the Regional E-ZPass discount. The current study also made use of the previous 10-year forecast prepared by WSA and delivered to the SJTA in November 2005. PURPOSE AND SCOPE OF STUDY

WSA was authorized by the SJTA to produce a ten-year forecast of ACE transactions and total revenue to be used in support of an upcoming bond financing. WSA was provided actual monthly traffic and toll revenue data by plaza from the SJTA. This data, which was provided for both cash and ETC patrons, allowed WSA to compare its recent 18 month and 10-year forecasts to ACE audited actual performance data. This process allowed WSA to track and account for the differences between forecasted and actual transaction and toll revenue experience. In particular, WSA was interested in the traffic and toll revenue impacts associated with the January 16, 2007 elimination of the Regional E-ZPass discount on the ACE.

Albany NY, Anaheim CA, Atlanta GA, Baltimore MD, Bangkok Thailand, Burlington VT, Charleston SC, Charleston WV, Chicago IL, Cincinnati OH, Cleveland OH Columbia SC, Columbus OH, Dallas TX, Dubai UAE, Falls Church VA, Greenville SC, Hong Kong, Houston TX, Iselin NJ, Kansas City MO, Knoxville TN, Lansing MI, Lexington KY, London UK, Milwaukee WI, Mumbai India, Myrtle Beach SC, New Haven CT, Orlando FL, Philadelphia PA, Pittsburgh PA, Portland ME Poughkeepsie NY, Raleigh NC, Richmond VA, Salt Lake City UT, San Francisco CA, Tallahassee FL, Tampa FL, Tempe AZ, Trenton NJ, Washington DC

Employee-Owned Company D-1 Atlantic City Expressway Traffic and Revenue Forecast DRAFT

This data provided by SJTA also allows WSA to review changes in the average toll and make any changes necessary to the average toll assumed by WSA in the forecasting effort. Socioeconomic variables such as population and employment were also updated as part of the current analysis. Perhaps most importantly, updated assumptions concerning the land-use developments within the travel corridor and Atlantic City were reviewed and incorporated into the traffic and toll revenue estimates developed for this study.

DESCRIPTION OF THE ACE

The ACE is a limited-access tolled facility operated by the SJTA that first opened to traffic on July 31, 1964. The ACE traverses the southern portion of New Jersey, from Atlantic City northwesterly through Atlantic, Camden and Gloucester Counties to a western terminus with State Route 42 (Black Horse Pike) and State Route 168 at Turnersville, approximately 10 miles east of Philadelphia. The total length of the ACE is about 47 miles including the Brigantine Connector. The ACE contains 14 interchanges with 9 toll ramp plazas and 2 mainline plazas. The ACE in a regional context is illustrated in Figure 1.

Primary arterials that feed traffic to the ACE are the Garden State Parkway at Interchange 7 just west of Atlantic City, State Route 73 at Interchange 31 near Winslow, and State Route 42 at Interchange 44 near Turnersville. Traffic to or from metropolitan New York and northern New Jersey access the ACE and Atlantic City via the Garden State Parkway at Interchange 7. ACE traffic bound for the shore and points south in Cape May County, New Jersey, transfers to the southbound Garden State Parkway. Access to the Atlantic City International Airport is at Interchange 9.

The ACE provides two travel lanes in the westbound direction throughout its entirety. A third westbound lane is provided between the Pleasantville mainline toll plaza and the Garden State Parkway. In the eastbound direction, the ACE provides two travel lanes between its terminus in Atlantic City and the Pleasantville mainline toll plaza. Between Interchange 33 at Winslow and Pleasantville (Milepost 3), the ACE provides one additional lane in the eastbound direction, going back to two lanes between Winslow and the western terminus at Interchange 44. A widening project that was completed in May of 2004 added a third lane in both the east and westbound directions between the Pleasantville mainline toll plaza and the foot of the McGahn Bridge in Atlantic City.

The newest facility addition to the SJTA is the 2.3 mile Atlantic City Expressway Connector which opened to traffic on July 31, 2001, and provides access to Brigantine Island, the Marina District of Atlantic City, and the Convention Center. The two-lane limited access roadway provides a direct link between the eastern terminus of the ACE and the Marina District of Atlantic City.

Electronic Toll Collection (ETC) was introduced almost nine years ago on November 11, 1998; utilizing the system known as E-ZPass. ETC has significantly improved operating characteristics of the ACE, providing motorists with faster passage through toll plazas. Additional improvements have been made to the E-ZPass system with the completion of Express E-ZPass lanes. The Express E-ZPass lanes (two in each direction at the Pleasantville Mainline Plaza) allow barrier-free movement through the plaza at normal travel speeds.

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76 130

Mt. Holly 70 206 OCEAN 73 5 72 295 Berlin Tunersville BURLINGTON

44 CAMDEN

GLOUCESTER Glassboro 38 44633 30

322 Winslow 31 SALEM Hammonton 28 ATLANTIC

40 Egg Harbor City

Vineland Pomona 17 9 Absecon

14 49 12 8 Bridgetown 7 5 4 Brigantine Millville 2 1

CUMBERLAND Atlantic Ventnor City

Margate

CAPE MAY Ocean City

Stone Harbor

LOCATION MAP - ATLANTIC CITY EXPRESSWAY FIGURE 1

D-3 Atlantic City Expressway Traffic and Revenue Forecast DRAFT

TOLL COLLECTION CONCEPT AND RATES The ACE has two barrier toll plazas where all vehicles pay tolls, at Pleasantville (Mile 3) and at Egg Harbor (Mile 18) either through manual cash, automatic coin machine, E-ZPass, or Express E-ZPass lanes. There are a total of 14 interchanges on the ACE. Tolls are collected at 6 of these 14 interchanges: Route 9 (Interchange 5), Pomona (Interchange 9), Mays Landing (Interchange 12), Hammonton (Interchange 28), Winslow (Interchange 33), and Williamstown (Interchange 38). Tolls are collected at these interchanges so as to intercept movements of major ingress and egress that would not otherwise pass through one of the mainline barriers. A toll-free movement permitted on the ACE is a round-trip between the western terminus, or Interchanges 41, 38, 31 or 28 and the Farley Service Plaza at Mile 21. Tolls at all of the ramp plazas are collected either through automatic coin machines or E- ZPass lanes. No tolls are collected on the Brigantine Connector.

The current ACE toll structure, which was implemented on January 16, 2007, is presented in Table 1. When implemented, the new toll schedule eliminated the Regional E-ZPass discount. While Regional E-ZPass toll rates are shown in the current toll schedule below, the discount no longer exists, and current Regional E-ZPass tolls are shown in the table below for comparison sake only.

Table 1 Toll Rate Schedule Altantic City Expressway

Previous Toll Rates Current Toll Rates Regional Frequent Regional Frequent Toll Location Classification Cash E-Zpass User E-Zpass Cash E-Zpass User E-Zpass Pleasantville Auto$ 0.50 $ 0.45 $ 0.34 $ 0.50 $ 0.50 $ 0.34 Limo 1.00 0.90 0.60 1.00 1.00 0.60 Dual Tire 1.00 0.90 0.90 1.00 1.00 0.90 Three Axle 1.50 1.35 1.35 1.50 1.50 1.35 Four Axle 2.00 1.80 1.80 2.00 2.00 1.80 Five Axle 2.50 2.25 2.25 2.50 2.50 2.25 Six Axle 3.00 2.70 2.70 3.00 3.00 2.70

Egg Harbor Auto 2.00 1.80 1.28 2.00 2.00 1.28 Limo 3.00 2.70 1.80 3.00 3.00 1.80 Dual Tire 3.00 2.70 2.70 3.00 3.00 2.70 Three Axle 4.50 4.05 4.05 4.50 4.50 4.05 Four Axle 6.00 5.40 5.40 6.00 6.00 5.40 Five Axle 7.50 6.75 6.75 7.50 7.50 6.75 Six Axle 9.00 8.10 8.10 9.00 9.00 8.10

Route 9 Auto 0.50 0.45 * 0.34 * 0.50 0.50 * 0.34 * Truck/Bus/Limo 0.50 0.50 * 0.50 * 0.50 0.50 * 0.50 *

Pomona, Mays Landing, Auto 0.50 0.45 * 0.30 * 0.50 0.50 * 0.30 * Hammonton, and Winslow Truck/Bus/Limo 0.50 0.50 * 0.50 * 0.50 0.50 * 0.50 *

Williamston, Berlin-Cross Keys Auto 0.25 0.22 * 0.15 * 0.25 0.25 * 0.15 * Truck/Bus/Limo 0.25 0.25 * 0.25 * 0.25 0.25 * 0.25 *

Note: The Regional E-Zpass discount was eliminated on January 16, 2007. * When two ramps are used in the same direction during one trip (within one hour) only one toll is charged to the user's E-Zpass account.

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While the Regional E-ZPass discount was eliminated the SJTA still provides a Frequent User E-ZPass discount. This discounted toll rates, which applies to E-ZPass patrons who use their E-ZPass tag at least 30 times during a 35 day period, remain unchanged from the previous toll schedule. In addition, at all toll ramps, any E-ZPass patron who passes through two toll ramp plazas in the same direction during the same trip (within a one-hour period) is charged for only one ramp toll.

ECONOMIC CONSIDERATIONS

A variety of national and regional economic and demographic conditions that may impact ACE transactions and toll revenue were reviewed as a part of this study. Recent economic trends, as well as the growth potential of the region, were evaluated. Growth in the region’s population or employment base (including counties in Pennsylvania surrounding Philadelphia) is likely to translate to increased transactions on the ACE, and therefore is a vital part of conducting the current forecasting effort.

NATIONAL ECONOMIC OVERVIEW

Recent national economic history has been impacted by a variety of events that have had a significant impact on the Unites States’ economy. After an economic expansion that had begun during the 1980s, the U.S. economy slowed in 2000 and 2001, experiencing a brief recession during those years. The country’s economic state was then significantly impacted by the terrorist attacks of September 11, 2001, which affected the travel and tourism industry in particular. Other factors impacting the state of the U.S. economy were a series of dot-com business failures, corporate scandals that affected consumer confidence, and the damage caused by hurricanes Katrina and Rita. Despite these obstacles, the U.S. Economy has resumed growing, due in large part to a strong real estate market, low interest rates, low inflation, and continued consumer spending. However, remaining unrest and instability in the Middle East and rising fuel costs may continue to affect consumer and investor confidence.

Currently, the Gross Domestic Product (GDP), which measures the value of all final goods produced within a county, stands at over $13.2 trillion per year. The Department of Commerce reports that between 1996 and 2006, the US GDP grew an average of 0.85 percent quarterly and 3.2 percent annually, after adjusting for inflation. The only quarters to show decreases in real GDP during that period were the third quarter of 2000, and the first and third quarters of 2001. Between 2005 and 2006, the GDP increased 3.12 percent, adjusting for inflation. The Federal Reserve, acting to keep inflation in check in the wake of significant increases in consumer spending and gross domestic product, has increased interest rates four times in 2005, the most recent bringing the base rate to 5.25 percent.

During the late 1990’s unemployment rates ranged between 4.7 and 4.2 percent. Following the September 11th, 2001 terrorist attacks and the resulting damage to the U.S. economy, unemployment rates began to rise, peaking at 6.3 percent during June of 2003. Since then, job growth has resumed and the unemployment rate has fallen back to 4.5 percent, as of April 2007.

Job growth has also continued in recent years, with the U.S. economy adding 88,000 new jobs during the first quarter of 2007. The Bureau of Labor Statistics forecasts that between 2004 and 2014, the U.S. will add 18.9 million jobs, representing an increase of 13 percent. This is the same annual rate as the

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previous decade (1994-2004). The major focus of job growth will continue to be in the professional and service sectors, with some additional growth in construction employment. By contrast, a 5 percent decline is expected in manufacturing sector employment.

The relationship between wages and prices is also an important indicator of the U.S. economy. Between March 2006 and March 2007, worker earnings increased 4.0 percent, representing a real change of 1.3 percent after adjusting for inflation. From 1996 to 2006, the average increase in the consumer price index, which measures inflation, was 2.5 percent. Between March 2006 and March 2007, the consumer price index rose 2.8 percent. The largest increases came from medical care and energy, with increases of 4.0 and 4.4 percent respectively.

Average annual gasoline prices have raised steadily since 2002, following increased demand for oil from Asia, continued instability in the Middle East, and the damage caused by Hurricanes Katrina and Rita. According to the Energy Information Administration (EIA), average annual gasoline prices rose from $1.35 per gallon in 2002 to $2.57 per gallon in 2006, and through the week ending May 21, 2007; an increase of 90.4 percent. Additionally, gasoline prices have begun to show greater seasonal differences. In 2006, there was a $0.67 change in average price of gasoline between January and July, a difference of 29 percent. The EIA predicts an average per gallon price of $2.77 for gasoline in 2007 decreasing slightly in 2008 to an annual average price of $2.66 per gallon.

Significant price increases are also expected with regard to home heating costs. The Department of Labor recently reported that in September 2005 wholesale prices experienced an increase of 1.9 percent, the most significant increase in inflation in over 15 years. The price of gasoline and energy in general, continues to cause concern as to the impact it will have on the overall economy.

According to the U.S. Census Bureau, current homeownership rates are at record levels, and have been steadily increasing since data was first collected in 1994. The U.S. Census Bureau estimates that in 2006 the overall homeownership rate was 68.9 percent, compared to 63.8 percent in 1986 and 65.4 percent in 1996. Between 1996 and 2006, the average sale price of a home within the U.S. increased by an average of 7.9 percent annually. During the first quarter of 2007 the average sale price of a home within the U.S. was $185,200, representing an increase of 16.1 percent over 2006.

REGIONAL DEMOGRAPHIC AND ECONOMIC CONSIDERATIONS

WSA conducted a corridor growth review of the region surrounding the ACE to assess the economic circumstances which will likely impact the future travel demand on the ACE. The following section reports the analysis of these demographic trends and forecasts.

In general, the land-use characteristics of a region and its population and employment base can be closely related to the region’s current demand for transportation infrastructure. Given this, growth in these areas, particularly in terms of population and employment growth, will likely have an impact on the number of vehicles on the region’s roadways. Population figures represent a source of potential trip productions in traffic studies; employment figures represent a source of potential trip attractions. The following section provides an analytical discussion of the population and employment projections which WSA used as input to traffic growth schedules developed by WSA subsequently in this report.

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POPULATION TRENDS AND PROJECTIONS Four individual Metropolitan Statistical Areas (MSAs) make up the largest travel market for the ACE. The MSAs are Atlantic City, Ocean City, Philadelphia-Camden-Wilmington, and Vineland-Millville- Bridgeton. A total of 14 counties in 4 states (New Jersey, Pennsylvania, Delaware, and Maryland) are included in the region as defined by the 4 MSAs. The Philadelphia-Camden-Wilmington MSA is further divided into 3 metropolitan divisions (Wilmington, Camden, and Philadelphia). The Philadelphia Metropolitan Division includes the City of Philadelphia.

HISTORIC POPULATION GROWTH As shown in Table 2, the region’s total population grew at 0.4 percent from 1980–1990 and 0.5 percent from 1990-2000. The Atlantic City MSA had the greatest positive change, in both decades, at 1.5 Annual Average Percent Change (AAPC) between 1980 and 1990 and at 1.2 between 1990 and 2000. Both the Philadelphia-Camden-Wilmington MSA and the Vineland-Millville-Bridgeton MSA had the smallest change in AAPC, at 0.4, from 1980–1990. The Philadelphia-Camden-Wilmington MSA again had the smallest change from 1990–2000, with an AAPC of 0.5. Of the three metropolitan divisions within the Philadelphia-Camden-Wilmington MSA, the Wilmington Metropolitan Division grew the most, with an AAPC of 1.0 in the first decade and by 1.2 in the second decade. The Philadelphia Metropolitan Division grew the least, with an AAPC of 0.1 from 1980–1990 and an AAPC of 0.3 from 1990–2000.

At the county level, Cecil County, Maryland, had the greatest AAPC in both decades, with an AAPC of 1.7 from 1980 to 1990 and an AAPC of 1.9 from 1990 to 2000. Chester County, Pennsylvania, also had an AAPC of 1.7 from 1980 to 1990. Philadelphia County, Pennsylvania, had the lowest AAPC in both decades, with an AAPC of -0.6 in the first decade and an AAPC of -0.4 in the second decade. The New Jersey County with the greatest AAPC from 1980 to 1990 was Cape May County which grew at 1.6 percent annually. Atlantic County, with 1.2 percent growth from 1990 to 2000 was the fastest growing New Jersey County in the region. The New Jersey County with the lowest AAPC in both decades was Salem County with 0.1 from 1980 to 1990 and -0.2 from 1990 to 2000.

At the state level, Maryland had by far the greatest AAPC between 1980 and 1990 at 1.8 percent, and between 1990 and 2000, at 2.0 percent. Pennsylvania had the lowest AAPC in both decades, ranging from 0.1 to 0.3 percent growth.

PROJECTED POPULATION GROWTH Similar trends are expected to continue over the course of the next two decades, from 2000 to 2020, according to projections developed by Woods & Poole Economics (www.woodsandpoole.com). On a state level, Maryland is expected to continue to experience the fastest growth, at 1.7 percent annually from 2005-2010. Growth throughout the entire region is projected to remain steady at 0.5 annually, based on the 2005-2010 AAPC and the 2010-2020 AAPC. The population of 6,346,800 in 2005 is forecasted to increase to 6,512,740 by 2010 and to 6,861,330 by 2020.

Metropolitan statistical areas which experienced higher growth in the past 20 years are forecasted to continue experiencing the highest growth in the region. This includes the Atlantic City MSA. The Atlantic City MSA is forecasted to have an AAPC of approximately 0.9 percent from 2005 to 2020,

June 27, 2007 Page 6 D-7 Atlantic City Expressway Traffic and Revenue Forecast DRAFT AAPC 2005-2020 (2) 538,450 0.3% 324,540731,990 1.1% 1.1% 2020 4,092,430 0.3% 2,047,000 0.7% 0.5% 6,861,330 0.5% 0.9%1.5% 597,790 124,110 0.9% 1.6% 1.0% 116,010 1.0% 1.5% 124,110 1.6% 0.9% 597,790 0.9% 0.9% 309,920 0.9% 0.5% 71,5601.0% 527,540 0.5% 1.1% 0.3% 158,980 0.2% 1.1%0.2% 558,480 569,580 1.1% 0.2% 0.5% 838,100 0.5% 0.7% 1,390,530 0.7% 0.9% 793,460 1.0% 0.3% 4,092,430 0.3% 0.5% 6,276,420 0.5% -0.3% 1,394,280 -0.3% AAPC 2010-2020 (2) 2010 0.2% 524,500 0.3% 0.3% 3,954,030 0.3% 0.7% 1,904,680 0.7% 1.1% 657,760 1.1% 1.1% 292,580 1.0% AAPC 2005-2010 (2) 240 0.5% 5,969,170 900 0.7% 1,293,080 180 0.3% 3,954,030 99,290 1.1% 104,780 97,800 1.7% 106,510 66,350 0.5% 68,030 97,800 1.7% 106,510 gton, D.C. 523,010 0.9% 547,520 523,010 0.9% 547,520 271,020 0.9% 283,770 153,250 0.2% 155,020 450,740 1.1% 476,000 463,280 -0.3% 1,438,750 474,030 1.1% 501,820 555,650 0.1% 559,760 775,880 0.5% 795,940 687,160 1.0% 722,060 2005 6,346,800 0.5% 6,512,740 s, Washin AAPC 2000-2005 (1) 2000 Table 2 Table 0.5% 6,188,463 0.5% 1.2% 500,265 0.9% 1.2% 252,552 1.4% 0.7% 102,326 -0.6% 1.0% 597,635 0.8% 621,340 0.6% 146,438 0.9% 0.1% 508,932 0.4% 518,250 1.2% 500,265 0.9% 1.9% 85,951 2.6% 0.7% 423,394 1.3% 0.6% 1,752,600 0.9% 1,835,810 1.0% 254,673 1.7% 276,910 0.3% 3,849,647 0.2% 3,890,180 1.9% 85,951 2.6% 1.4% 433,501 1.8% 0.1% 550,864 0.2% 1.0% 750,097 0.7% 1.2% 650,501 1.1% 0.5% 1,186,999 1.0% 1,245, 0.3% 3,849,647 0.2% 3,890, 0.5% 5,687,147 0.5% 5,823, -0.2% 64,285 0.6% -0.4% 1,517,550 -0.7% 1, AAPC 1990-2000 umes 1, 2, 3, WoodsEconomicPoole Population Trends and Projections 8 6 (1) 1990 rea AAPC 1980-1990 (1) 82,266 1.5% 95,089 64,676 0.1% 65,294 60,430 1.7% 71,347 60,430 1.7% 71,347 398,115 1.0% 441,946 479,180 1.2% 541,174 194,119 1.5% 224,327 132,866 0.4% 138,053 471,650 0.6% 502,824 398,115 1.0% 441,946 362,542 0.9% 395,066 199,917 1.4% 230,082 316,660 1.7% 376,396 555,023 -0.1% 547,651 643,377 0.5% 678,111 523,221 1.0% 578,587 1980 1,508,036 0.9% 1,650,735 5,649,031 0.4% 5,892,937 1,688,210 -0.6% 1,585,577 3,682,450 0.1% 3,728,909 1,034,109 0.9% 1,127,972 3,682,450 0.1% 3,728,909 5,239,780 0.4% 5,435,4 rea onomicand Demographic Source Data 2006, Vol Area politan Statistical Area ivision PA-NJ-DE-MD Metropolitan Statistical A ineland-Millville-Bridgeton, NJ Metro County Cumberland NJ County, V Atlantic City, NJ Atlantic City, Atlantic City, Atlantic NJ Metropolitan Statistical Wilmington, DE-MD-NJ Metropolitan D Cape May County, NJ County, Cape May DE CastleCounty, New Ocean City, NJ MetropolitanNJ A Statistical Ocean City, Philadelphia-Camden-Wilmington, Delaware Cecil County, MD Cecil County, Maryland Salem County, NJ Salem County, New JerseyNew Pennsylvania Division Total GRAND TOTAL GRAND (1) Source: US Census Data (2) Forecasted data from The CompleteEc Camden, NJ Metropolitan DivisionCamden, NJ Metropolitan NJ Burlington County, Camden NJ County, Gloucester NJ County, Division Total PA Philadelphia, DivisionMetropolitan Bucks PA County, PA Chester County, Delaware County, PA County, Delaware Montgomery County, PAMontgomery County, Philadelphia County, PA County, Philadelphia Metropolitan Statistical Area Total Division Total

June 27, 2007 Page 7 D-8 Atlantic City Expressway Traffic and Revenue Forecast DRAFT C P A 690,770 0.9% 429,790 1.3% % 68,470 0.9% 8% 294,410 0.8% 3% 149,390 1.3% 6% 336,640 1.7% 1% 1,173,960 1.1% 5% 831,550 0.5% 020 2020 2005-2020 .7% 47,410 1.8% CA 1.0% 4,314,770 1.0% 1.1% 212,590 1.1% 1.3% 429,790 1.3% 0.9% 2,663,610 0.9% 1.4%1.5% 433,120 385,410 1.4% 1.6% 0.8% 322,760 0.8% 0.6% 79,420 0.6% 1.7% 47,410 1.8% 0.8% 33,040 0.8% P 1.3% 510,240 1.3% 0.9% 2,663,610 0.9% 1.2% 780,440 1.2% 1.0% 3,954,290 1.1% A CA P A 0 1.0% 630,170 0.9% ,210 0.8% 272,940 0. ,090 0.9% 62,880 0.9 ,730 1.8% 287,340 1. ,120 1.2% 1,052,020 1. ,450 1.4% 378,280 1.3% ,750 0.5% 793,060 0. ,310 2.0% 40,000 1 05 2005-2010 2010 2010-2 2,880 1.4% 131,700 1. 94,160 1.1% 3,901,090 14,280 1.0% 2,430,790 72,940 0.6% 75,100 36,310 2.0% 40,000 29,380 0.8% 30,600 47,820 1.3% 691,980 180,890 1.1% 191,460 352,450 1.4% 378,280 351,510 1.5% 378,700 304,790 1.7% 331,670 284,330 0.9% 297,190 418,140 1.4% 448,880 2,314,280 1.0% 2,430,790 3,380,240 1.1% 3,571,650 CA D.C. P A Table 3 Table CA 0.8% 3,579,200 0.6% 3,6 0.1% 254,570 0.6% 262 0.8% 175,500 0.6% 1.7% 352,020 0.0% 1.8% 327,460 1.4% 0.6% 278,080 0.4% 1.3% 54,040 2.1% 60 1.6% 237,450 2.0%2.9% 262 286,200 1.3% 1.8% 109,740 2.3% 12 1.4% 592,620 0.2% 599,90 0.9%0.7% 930,690 2,264,500 1.3% 0.4% 2,3 991 0.3% 71,080 0.5% 1.7% 352,020 0.0% 352 2.1% 31,990 2.6% 2.1% 31,990 2.6% 36 P 1.5% 412,320 0.3% 1.0% 601,760 1.5% 6 -0.8% 780,140 -0.2% 773 -0.3% 28,310 0.7% A 0-2000 2000 2000-2005 20 Employment Trends and Projections and Trends Employment 0 0.7% 2,264,500 0.4% 0 0.9% 3,278,580 0.6% , 3, Woods, 3, Economics, Washington, Poole a CA P A A 38,390 2.1% 47,430 70,480 2.7% 92,220 65,020 0.6% 68,850 19,140 3.2% 26,100 29,740 -0.2% 29,230 19,140 3.2% 26,100 1980 1980-1990 1990 199 109,920 4.0% 162,380 205,790 2.0% 251,370 219,080 3.1% 298,420 203,000 3.1% 274,620 866,220 -0.3% 842,040 220,550 1.7% 261,990 149,750 3.7% 215,210 145,480 3.4% 202,530 409,480 2.4% 517,830 664,820 2.5% 854,010 219,080 3.1% 298,420 267,960 2.8% 353,750 421,750 2.6% 546,120 2,752,040 1.8% 3,290,220 1,849,000 1.3% 2,111,690 1,849,000 1.3% 2,111,69 2,538,710 1.7% 3,011,56 rea tan Statistical Area Statistical tan mographic Data Source 2006, Volumes2 1, 2006, Source Data mographic -NJ-DE-MD Metropolitan Statistical Are -NJ-DE-MD Metropolitan Statistical al Area al Division Camden, NJ Metropolitan Division NJ Metropolitan Camden, NJ County, Burlington Camden County, NJ Camden County, NJ County, Gloucester Division Total Division Philadelphia-Camden-Wilmington, PA Philadelphia-Camden-Wilmington, New Castle County, DE County, Castle New Wilmington, DE-MD-NJ Metropolitan Metropolitan DE-MD-NJ Wilmington, Philadelphia, PA Metropolitan Division Metropolitan PA Philadelphia, PA Bucks County, County New Jersey New TOTAL GRAND Atlantic City, NJ City, Atlantic Atlantic City, NJ Metropolitan Statistical A Statistical Metropolitan NJ City, Atlantic Total Division PA County, Philadelphia Maryland Pennsylvania Cape May County, NJ County, May Cape Ocean City, NJ Metropolitan Statistic Metropolitan NJ City, Ocean MD County, Cecil NJ County, Salem PA County, Chester Montgomery County, PA County, Montgomery Delaware The De Economic Complete and Source: Delaware County, PA County, Delaware Total Division Total Area Statistical Metropolitan Metropoli NJ Vineland-Millville-Bridgeton, NJ County, Cumberland

June 27, 2007 Page 8 D-9 Atlantic City Expressway Traffic and Revenue Forecast DRAFT

adding 57,368 people. Of the four metropolitan statistical areas, Vineland-Millville-Bridgeton MSA is projected to experience the lowest AAPC with 0.2 percent growth from 2005-2010 and 0.3 percent growth from 2010 to 2020.

At the county level, the highest AAPC Cecil County, Maryland is forecasted to experience the fastest population growth at 1.7 percent annually from 2005–2010 and 1.5 from 2010–2020. The lowest AAPC is projected to come from Philadelphia County, Pennsylvania at -0.3 percent from 2005–2010 and -0.3 percent from 2010–2020. The New Jersey counties with the greatest projected AAPC are Burlington County, Cape May County and Gloucester County with over 1.1 percent annual growth from 2005 to 2010 and 1.0 percent growth annually from 2010 to 2020. The New Jersey counties projected to have the smallest AAPC are Camden and Cumberland, at 0.2 percent, from 2005 to 2010 and 0.3 percent from 2010 to 2020. At the state level, Maryland is forecasted to have an AAPC of approximately 1.6 percent from 2005–2020. Pennsylvania is projected to have the lowest AAPC with 0.3 percent from 2005–2020.

EMPLOYMENT TRENDS AND PROJECTIONS Employment statistics are commonly used as an indicator of trip attractions to an area. Strong and stable employment growth in an area indicates the potential for an increase in the demand for transportation infrastructure. Historic employment trends and future-year forecasts from Woods & Poole Economics for the four MSA regions are presented in Table 3.

HISTORIC EMPLOYMENT GROWTH Trends for employment growth in the four MSAs varied significantly over time and also across the region. Combined, the entire area experienced an AAPC of 1.8 percent from 1980–1990 while employment growth slowed significantly from 1990 to 2000. During the latter period employment growth in the region decreased to only 0.8 percent annually. The Atlantic City MSA experienced significantly higher employment growth than any other area from 1980-1990. During this time the Atlantic City MSA experienced employment growth of 4.0 percent annually. During the same period, most of the remainder of the region also experienced steady employment growth. The Ocean City and Philadelphia-Camden-Wilmington MSAs experienced in the neighborhood of 2.0 percent growth annually. The only area which saw little growth in total employment was the Vinelane-Milleville- Bridgeton MSA, which experienced an AAPC 0.6 percent during this period.

From 1990-2000 a sharp decline in employment growth is seen across the four-MSA regions. The largest variation occurred in the Atlantic City MSA, which went from an AAPC of 4.0 from 1980–1990 to 0.8 from 1990–2000. The Ocean City MSA had the greatest increase in employment from 1990– 2000, with an AAPC of 1.3 percent. Employment across the Philadelphia-Camden-Wilmington MSA varied by metropolitan division, as well as by county. While the Wilmington Metropolitan Division (2.8 and 1.5) and the Camden Metropolitan Division (2.6 and 1.0) AAPC were similar in growth across the two decades, the Philadelphia Metropolitan Division (1.3 and 0.7) was significantly lower.

At the county level, Atlantic County, New Jersey, had the highest level of employment growth between 1980 and 1990, with an AAPC of 4.0 percent. Chester County, Pennsylvania, had the highest level of employment growth between 1990 and 2000, with an AAPC of 2.9%. Counties which experienced a loss of employment over the 20-year time period were Salem County, New Jersey and Philadelphia

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County, Pennsylvania. The New Jersey County with the highest level of employment growth between 1990 and 2000 was Gloucester County with an AAPC of 1.8 percent.

PROJECTED EMPLOYMENT GROWTH Employment levels across the four-MSA regions are forecasted to steadily increase at average annual rate of 1.0 percent from 2000–2020 by Woods & Poole Economics. These figures have been revised upwards slightly compared to previous forecasts, indicating a stronger economic outlook. Growth for each MSA is also quite steady between 2005-2010 and 2010-2020. From 2005 to 2020, the projected employment levels range from 0.6 AAPC in the Vineland-Millville-Bridgeton MSA to 1.1 AAPC in the Atlantic City MSA. A comparison of the four MSA’s employment growth shows that the Atlantic City, Ocean City, and Philadelphia areas are forecasted to have very similar employment growth of around 1.0 percent annually. Comparatively, the Vineland-Milleville-Bridgeton MSA is forecasted to have much lower employment growth, with an AAPC of 0.6 percent between 2005 and 2020.

At the county level, employment is forecast to grow the fastest in Cecil County, Maryland, with an AAPC of 1.8 percent between 2005 and 2020. Over the same period, most New Jersey counties within the region are expected to grow by approximately 1.0 percent annually. A notable exception to this is Burlington County, New Jersey, which is projected to grow 1.7 percent annually from 2005-2020 The county projected to grow the slowest is Philadelphia County, with an AAPC of 0.5 percent between 2005 and 2020. By state, Maryland showed the greatest increase in employment between 2005 and 2020 with an AAPC of 1.8 percent.

CASINO PERFORMANCE AND EXPANSIONS The major engine for economic growth within the ACE corridor is Atlantic City. Atlantic City is a mature market, with room for redevelopment. The surrounding land uses are less developed and provide areas for expansion and growth. The existing gaming industry and the prospect for growth of the casino- related industries within the Atlantic City environs provide local residents with significant employment opportunities, with over 45,000 people working in the Casino industry during 2006. This is a vital part of the economic well being of the Atlantic City area. This casino-related growth, in concert with other redevelopment activity in Atlantic City, has contributed to increased traffic along the ACE. As detailed in Table 4 there are currently 11 operating hotel-casinos in Atlantic City, which provide over 15,100 hotel rooms and approximately 1,320,000 square feet of gaming space.

Table 4 Atlantic City Casino Hotels

2006 Net 2005 Net Percent Change in Hotel Parking Casino Simulcast Room Table Games Slot Casino Salaries Casino Revenue ($000) Revenue ($000) Net Revenue (%) Rooms Spaces(1) Size (s.f.) Size (s.f.) in Casino Machines and Wages ($000)

Atlantic City Hilton Casino Resort $294,271 $265,051 11.02 805 1,825 69,422 N/A 118 2,245 $67,602 Bally's Atlantic City 658,958 633,521 4.02 1,745 4,086 178,815 47,937 215 5,384 155,798 Borgata 813,265 763,983 6.45 1,971 4,749 136,794 23,620 262 4,069 144,573 Caesar's Atlantic City Hotel Casino 536,096 507,535 5.63 1,139 2,898 110,895 29,116 165 2,802 105,107 Harrah's Marina 470,214 446,651 5.28 1,630 3,822 147,087 N/A 112 3,732 84,116 Resorts Hotel & Casino 252,281 246,357 2.40 879 1,337 81,964 16,396 90 2,772 67,548 Sands Hotel & Casino 138,376 162,339 (14.76) 620 1,684 57,045 23,696 98 1,986 53,233 Showboat Casino Hotel 391,443 380,375 2.91 1,331 3,752 123,942 17,022 105 3,265 76,315 Tropicana Casino & Resort 487,217 477,226 2.09 2,129 5,365 138,868 8,380 209 3,888 100,394 Trump Marina Casino Resort 244,747 241,127 1.50 728 2,986 64,271 14,670 73 2,031 63,826 Trump Plaza Hotel & Casino 278,765 273,391 1.97 906 2,658 96,656 N/A 90 2,284 75,728 Trump Taj Mahal Casino Resort 502,650 477,703 5.22 1,250 7,180 112,999 48,246 206 3,778 117,915

Total $5,068,283 $4,875,259 3.96 15,133 42,342 1,318,758 229,083 1,743 38,236 $1,112,155

(1) - As of December 2004 Source: New Jersey Casino Control Commission, 2006 Year End Report

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In 2006, these casinos reported net revenue of $5.1 billion, which was an approximately 3.96 percent increase over 2005 net revenues. Borgata, which opened in 2003, had the highest net revenues of the 11 Atlantic City casinos in both 2005 and 2006, with a total of $813 million in 2006. Of the eleven casinos with increased net revenue in 2006, Atlantic City Hilton Casino Resort saw the greatest change, with a 11.02 percent increase over 2005 net revenues. Only one casino, Sands Hotel and Casino, experienced a loss in net revenue between 2005 and 2006, due to its closure on November 11, 2006 in order to make way for a larger $1.5-2.0 billion casino by Pinnacle Gaming. All of this data indicates that 2006 was a favorable year for the gaming industry.

The Borgata Hotel Casino and Spa, which opened July 4, 2003, was Atlantic City’s first new casino hotel in over a decade. Borgata added over 100,000 square feet of gaming space and 2,000 hotel rooms. The Borgata North Tower, a 39 story $335 million addition is currently under construction and will add 805 guest rooms. Harrah’s Showboat completed an expansion project in 2003, adding a 19-story, 544- room, hotel tower. Harrah’s Tower, a 47 story $550 million addition is currently under construction and will add 964 guest rooms. The Trump 39 story Taj Tower is also currently under construction with an estimated cost of $250 million. Tropicana also recently finished construction and opened “The Quarter at Tropicana.” This project, which was in addition to a 502-room expansion to the casino’s hotel, includes a variety of retail and dining establishments. A variety of additional projects, undertaken by both casino and non-casino developers continue to take place in the Atlantic City region. Two residential developments are currently under construction; the 60 townhouse condominiums at Chelsea View and 36 units at Cityscape II.

The success of Atlantic City’s gaming industry is also beneficial to the community through the efforts of The Casino Reinvestment Development Authority (CRDA). According to its mission statement CRDA, which was established by the State of New Jersey in 1984, “is responsible for maintaining public confidence in the casino gaming industry through the reinvestment of a portion of industry revenues to revitalize Atlantic City.” Since its creation, the CRDA has invested in projects such as the Atlantic City Boys and Girls Club, the Atlantic City’s Hope VI housing efforts, and economic development projects such as The Pier at Caesars.

PLANNED DEVELOPMENT Development, and redevelopment, continues to take place in Atlantic City. The following projects planned to open in the near future will likely impact transactions on the ACE by continuing to improve Atlantic City’s tourism industry. “The Water Club,” is a new upscale wing of the Borgata Casino that will include 800 upgrade rooms and suites, four pools, a spa, meeting spaces, residences, and retail. The project marks the completion of Borgata’s $600 million master plan. Several other casinos projects are being considered and may be constructed over the next few years. After purchasing the Sands Hotel and Casino, Pinnacle Gaming permanently closed it on November 11, 2006. Pinnacle Gaming intends to demolish the building and construct a larger casino, worth $1.5-2.0 billion, by 2011. MGM Mirage also announced in March 2006 that it was beginning design work on a new casino named CityCenter East, to be located between Borgata and Harrah’s Atlantic City. Other projects, such as The Pier at Caesars and Bella Condominiums, will continue to bring additional retail and housing alternatives to Atlantic City.

RESIDENTIAL CONSTRUCTION Given the location of the ACE, and the interaction between transactions on the ACE and socioeconomic growth in the southern counties of New Jersey, WSA reviewed historical residential building permit

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data. A review of building permit data for counties in Southern New Jersey shows that residential growth is also driving higher transactions along the ACE. A review of building permits provides support for the future-year population and employment growth forecasted by Woods & Poole Economics. Table 5 shows the permits issued annually for a selection of New Jersey counties between 1995 and 2006. The data, as complied by the New Jersey Department of Labor, shows that over the last 10 years many counties experienced a greater number of building permits for residential housing. In Atlantic, Camden, Cape May and Gloucester Counties, 2005 building permits were more than double the permits issued in 1995. Other counties, such as Cumberland, Ocean, and Salem, also issued significantly more permits in 2005 than 1995. The only county to issue fewer permits in 2005 than 1995 was Burlington County. The building permit trend for Atlantic County is what would be expected given a connection between population and growth and transaction growth on the ACE. Residential building permits increased every year between 1995 and 2003, with the exception of 1997. Total building permits in Atlantic County in 2005, while less than 2003, still are up 295.3% percent over 1995. Preliminary 2006 data shows an overall decrease of 24.5% for the selected counties, primarily due to decreases in Burlington, Camden, Cape May, Gloucester, and Ocean Counties. The only counties to show increases of building permits were Cumberland and Salem counties. Although the data is only preliminary, the decrease in building permits may be due to a cooling of the real estate market and a growing scarcity of developable land.

Table 5 1995-2006 Privately Owned Residential Housing Units Authorized by Building Permits

AAPC AAPC County 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(1) 1995-2005 2005-2006

Atlantic 678 1,041 1,003 1,220 1,401 1,625 1,685 2,020 2,285 2,075 2,002 1,887 11.4% -5.7% Burlington 1,688 2,293 2,300 2,715 2,755 2,775 2,184 2,359 1,805 1,516 1,475 1,247 -1.3% -15.5% Camden 865 1,222 1,328 874 867 796 757 1,160 1,934 1,413 1,706 1,183 7.0% -30.7% Cape May 544 671 912 1,015 1,226 1,242 1,403 1,422 1,693 2,149 2,433 1,579 16.2% -35.1% Cumberland 403 316 450 416 371 255 256 310 374 566 630 735 4.6% 16.7% Gloucester 878 1,057 1,175 1,366 1,527 1,337 1,635 1,802 1,859 2,050 2,075 1,170 9.0% -43.6% Ocean 2,508 2,983 3,433 3,934 4,192 5,633 3,830 3,534 4,009 3,818 2,904 2,113 1.5% -27.2% Salem 139 92 143 138 147 161 180 170 307 334 297 300 7.9% 1.0% Total 7,703 9,675 10,744 11,678 12,486 13,824 11,930 12,777 14,266 13,921 13,522 10,214 5.8% -24.5%

New Jersey 21,521 24,173 28,018 31,345 31,976 34,585 28,267 30,441 32,984 35,936 38,588 32,566 6.0% -15.6%

(1) - 2006 Data is Preliminary Source: New Jersey Department of Labor, 2006

SUMMARY/CONCLUSIONS OF REGIONAL ECONOMIC CONSIDERATIONS

With forecasted steady increases in population, employment, and the positive trend over the last 10 years in the region’s residential building permits, WSA expects traffic and revenue on the ACE to continue to experience increases as have been seen historically experienced. Continued redevelopment in Atlantic City and casino expansions strengthen the region’s tourism industry. While the central city of Philadelphia is projected to continue declining in population, its suburbs, including those along the ACE, are projected to grow, such as communities within Burlington and Gloucester Counties. The coastal counties of Atlantic, Cape May, and Ocean Counties are also growing, particularly in residential construction. These counties will also continue to provide bedroom and retirement communities to the growing population. Atlantic City, with its casinos, convention centers, and tourist amenities will continue to attract workers and travelers.

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HISTORICAL TRAFFIC AND TOLL REVENUE TRENDS ON THE ACE

WSA collected and evaluated historical traffic and toll revenue trends for the ACE. WSA made this evaluation in order to gain an understanding of the transaction and toll revenue trends of the ACE. Trends in total annual traffic and toll revenue, by plaza, are presented in Table 6. Since 1998, the ACE has experienced a significant annual transaction growth of 3.5 percent annually. For the most part, the Pleasantville, Pomona and Egg Harbor mainline plazas have recorded the smallest annual growth, at 1.7 percent, 2.2 percent and 2.4 percent, respectively. Most of the ramp plazas have experienced much higher annual transaction growth, in the range of 5.0 percent annually. In 1998, a total of 50,855,587 vehicles were recorded on the ACE. Transactions at the two mainline barriers accounted for 77 percent of these transactions. By 2006, the percent of transactions made up by the two mainline barrier plazas has decreased to approximately 68.7 percent. This is because transactions at the tolled ramp plazas have experienced faster growth than have the mainline plazas in recent past.

The trend in annual toll revenue on the ACE exhibits a similar pattern of growth. Between 1998 and 2006, annual toll revenue grew by an average of 10.1 percent per year. It is important to note that the 10.1 percent is reflecting the toll rate increase of November 30, 1998 and the August 12, 2003 E-ZPass discount reduction. The dynamic between the varying toll rates of mainline and ramp plazas and higher growth on ramp plazas is visible when comparing transaction versus revenue growth. During years which are unaffected by changes to the toll schedule, revenue increases are lower than transaction increases. This is because a significant portion of transaction growth is occurring on the ramp plazas, but the toll rates on these ramps is noticeably lower than at the mainline plazas.

MONTHLY TRAFFIC VARIATIONS Average monthly traffic variations on the ACE from 2004 thru December 2007 are presented in Table 7. The data contained in Table 7 shows actual experience on the ACE through April 2007 with WSA estimated for the remaining eight months (May through December). The ACE experiences significant seasonal traffic variations by month, due in large part to the recreational summer traffic that the ACE serves. July and August represent the peak travel months on the ACE. The months of January and February are the lightest travel months on the ACE, reflecting not only the seasonal variation of the tourism industry but also the impact of inclement weather.

REGIONAL HIGHWAY IMPROVEMENTS

Potential road projects that could influence traffic on the ACE may arise from plans developed by the New Jersey Department of Transportation (NJDOT) and the three Metropolitan Planning Organizations (MPOs) with jurisdiction in New Jersey. WSA has reviewed the current plans prepared by these agencies.

NEW JERSEY DEPARTMENT OF TRANSPORTATION The NJDOT, in 2001, prepared a long-range plan entitled Transportation Choices 2025 to guide transportation agencies and statewide investments for the next 25 years. The document was prepared cooperatively with New Jersey Transit (NJT), other transportation agencies and the three MPOs within the state: South Jersey Transportation Planning Organization (SJTPO), Delaware Valley Regional

June 27, 2007 Page 13 D-14 Atlantic City Expressway Traffic and Revenue Forecast DRAFT 5.8% 3.5% 5.5% 2.3% 1.4% -0.3% 59,374,302 58,030,387 57,250,138 44,434,942 48,532,827 51,190,356 27,444,172 45,853,899 44,322,412 Annual Toll Annual Revenue ($)

$

5.3% 8.4% 7.5% 2.2% 3.5% 3.5% 10.1% 2.3% 4.5% 11.8% -5.5% 61.9% 66,761,421 64,484,230 63,018,575 59,000,048 60,326,708 54,415,354 50,619,351

(6) - - - - - 5.4% 7.9% 5.1% 22.2% 3,420,863 3,169,689 3,017,020 2,237,194 2,668,285 2,121,670 1,028,772

48,050,179

50,855,587

4.6% 2.4% 2.6% 106.2% 2.2% 19.3% 3.1% 3.7% 6.7% 13.1% 4.5% 4,819,046 4,672,766 4,507,304 3,460,248 4,132,893 4,223,897 3,952,857 3,378,316 3,853,354

Williamstown Berlin Total 3.9% 2.1% 4.7% 7.6% 5.4% 877,107 837,634 852,644 589,383 815,207 792,482 784,729 577,267 700,776

Toll Revenue 4.8% 5.0% 12.0% 6.7% 1.5% -2.8% 2.2% 0.0% -1.8% 6.5% 4.7% 10.9% 18.9% 11.4% 1,745,950 1,709,089 1,708,276 1,579,858 1,603,603

(5) Table 6 Table ------8.7% 7.5% 21.4% 613,365 970,130 US 9US Hammonton Winslow 1,332,167 1,225,855 1,139,991 Atlantic City Expressway City Atlantic Annual TolledTransactions Annual

1,294,076

1,507,115 1,213,066 1,435,442 r 2.4% 2.4% 2.1% 58.2% 5.3% 6.6% 2.2% 1.3% 5.7% 17.5% -5.6% Egg Trendsin Annual Toll Transactions and Harbo 19,253,532 18,839,588 18,601,384 15,003,949 16,178,518 15,892,396 15,367,418 17,238,838 17,602,006

4.8% 4.0% 9.2% 1.6% 1.8% 4.3% Mays 5,491,095 5,402,781 5,309,358 3,409,054 4,228,956 3,781,684 3,721,525 4,895,219 5,089,883

ted November 30,1998. lin-CrossRoad Keys opened 24,2000.May on ducedAugust on 12th. S. 9S. were openedto trafficon March 26,2002. ersey Transportationersey Authority 2.9% 2.2% 4.6%2.0% 13.6% 15.8% 8.9% 6.3% 2.4% 3.2% 3,211,150 3,021,234 2,949,762 2,390,158 2,722,832 2,694,640 2,603,313 2,777,704 2,858,616

1.7% 4.6% 7.8% 0.0% 3.9% 2.7% 1.7% -0.8% -6.1% -11.3% -9.9% 26,610,511 25,605,594 24,932,836 21,903,311 23,318,218 21,908,751 24,709,770 24,517,806 22,918,677

Pleasantville Ponoma Landing (1) (2) (3) (4) r AAPC 1998-2006 2000-2001 2001-2002 2002-2003 2005-2006 AAPC 1998-1999 1999-2000 2004-2005 2003-2004 2006 2005 2000 2003 2004 1999 2002 2001 (1) -First increase toll since 1969implemen (2) -Toll ramps to and from the westBer a (3) -Toll ramps to and from the west at U. (4) -The E-Zpass discount amount was re (5) -AAPC 2002-2006 (6) -AAPC 2000-2006 Source: Atlantic Expressway, City South J Yea 1998

June 27, 2007 Page 14 D-15 Atlantic City Expressway Traffic and Revenue Forecast DRAFT al otal 83,739 4,549,737 71,694 4,289,478 77,681 4,214,740 94,278 4,939,278 87,183 4,625,183 98,001 4,590,001 209,510 6,521,109 173,332 5,346,208 169,041 5,844,250 177,143 5,592,143 114,908 5,460,908 212,512 6,900,512 141,358 4,580,886 223,586 6,971,586 226,362119,774 6,763,463 5,092,395 141,461 4,680,491 172,835 6,044,835 150,666 4,947,613 153,972 4,923,299 124,846 3,911,002 135,472 4,093,801 1,872,977 $59,903,365 $350,445 $4,562,945 $334,179 $4,109,606 $1,971,000 $63,652,103 (1) Actual Revenue Actual Actual Revenue Actual 2005 2007 2007 ansactions Tolls Concessions Tot ransactions Tolls Concessions T Actual Toll Actual Actual Toll Actual ember are WSA estimates. ear. 2.4 6,459,295 6,311,599 0.3 5,687,721 5,172,876 5.6 5,946,837 5,675,209 2.2 4,963,014 4,217,784 4.2 5,020,418 4,439,529 3.8 6,663,5480.8 6,537,101 5,007,710 4,137,059 3.4 5,765,700 5,415,000 1.9 5,217,877 4,539,030 6.0 5,531,800 5,346,000 6.13.8 6,606,000 6,573,400 6,748,000 6,688,000 5.2 6,000,300 5,872,000 1.3 5,284,842 4,796,947 2.8 5,348,459 4,769,327 4.8 5,351,600 4,845,000 4.2 5,117,300 4,538,000 3.4 5,205,200 4,492,000 2.0 4,490,198 3,958,329 -0.6 5,162,543 4,465,998 -1.3 5,374,025 4,972,621 -5.2 4,499,781 3,786,156 1.5% 64,484,230 $58,030,388 $ 1.7% 4,918,428 $4,212,500 1.5% 4,481,461 $3,775,426 3.9% 66,193,227 $61,681,103 and Concession Revenue and Concession Percent Change Percent Percent Change Percent Table 7 Table Atlantic CityAtlantic Expressway Total Transactions Revenues T Total Transactions Revenues Tr 5,327,853 2.7 5,405,751 -1.4 5,534,822 5.8 6,514,528 4.2 5,743,739 -0.4 4,591,097 4.6 4,882,506 -2.3 6,570,537 1.0 $4,487,842 -0.2% $4,049,593 2.4% ,888 $59,023,025 2.3% ,995 $61,279,044 -0.9% 8,817 4,576,161 1.2 1,296 4,198,385 3.7 7,867 4,127,482 -3.0 6,375 4,789,394 -1.7 9,270 4,711,388 -0.2 4,614 4,013,303 -3.5 2,254 4,437,624 0.0 Monthly Toll Transactions, Toll Revenue, Monthly Toll Transactions, ta through AprilSJTA. provided through by May Dec 70,569 4,180,027 1.2 10,139 6,646,885 -1.4 94,929 4,438,242 -0.3 180,504 6,369,782 2.4 125,600 5,158,048 -1.0 109,670 5,151,833 -1.4 127,265 4,395,247 2.7 Sunoco Stations of $200,000 paid in January of each y Actual Revenue Actual Revenue 2006 2004 5,536,254 5,166,781 161,072 5,620,197 5,378,710 156,112 5,845,623 5,230,586 175,165 4,377,699 $3,713,106 $336,487 4,929,219 $4,135,234 $352,608 6,397,059 6,318,282 196,246 4,989,861 4,460,044 131,053 6,025,046 5,574,471 169,268 5,408,421 4,708,893 173,613 6,537,720 6,349,447 221,090 Actual Toll Actual Actual Toll Actual Transactions Tolls Concessions Transactions Tolls Concessions (2) (2) Month Month Actual transactions toll and concession revenue da Includes a one-time Ground Rent payment from AugustOctoberNovember 6,306,816December 5,102,143 4,784,198 6,189,278 Total 4,946,689 4,487,344 4,127,089 4,109,458 63,018,575 8 7 $57,250,137 $1,772 September 5,430,150 5,032,448 July May June January January March 4,886,217 4,267,982 April February 4,641,292 3,999,615 12 FebruaryMarch 4,651,600 5,443,542 3,888,689 4,643,019 12 14 May June April July October 5,364,381 4,622,118 8 NovemberDecember 5,116,692 5,221,634 4,355,370 4,343,313 8 September 5,610,637 5,042,163 Total 66,820,886 $59,330,049 $1,948 August 6,666,371 6,436,746 2 (1) (2)

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Planning Commission (DVRPC) and North Jersey Transportation Planning Authority (NJTPA). The NJDOT plan was completed in March 2001. As required by federal and state law, currently the NJDOT is in the process of finishing work on an updated New Jersey Long Range Transportation Plan (LRTP). This new LRTP will extend to the year 2030, and is due for release in 2007.

The current Transportation Choices 2025 has three components: a five-year program, a ten-year programmatic approach, and a 25-year strategic direction element. The five-year program identifies projects that have gone through initial planning and scope development and are undergoing final project design or construction. The ten-year element establishes a direction for investments and system improvements through the year 2010. The 25-year element indicates the level of investments needed, based on travel forecasts and analysis of several different scenarios.

The five-year capital program takes as a first priority to bring transportation infrastructure to “a state of good repair” and maintain it there. A second priority is to address safety concerns and issues by making improvements in various places. The third major category within the five-year plan is congestion relief, and includes projects to address congestion at the 40 most congested areas in the state and build some strategic by-pass links. Many of these goals are also modeled after the priorities set by the federal SAFETEA-LU transportation legislation passed in 2005. In addition, the 2008-2012 Statewide Capital Investment Strategy also sets as its goal an investment in infrastructure that will support economic growth, especially in urban areas. This goal is consistent with the 2006 Economic Growth Strategy outlined by Governor Corzine.

The ten-year element calls for increasing mobility by a combination of improved bus services, multimodal access, travel demand management, increasing use of Intelligent Transportation Systems (ITS) technology, and additional capacity in key areas where a need has been identified.

By the year 2025, the projected increases in vehicle-miles of travel (VMT) cannot be accommodated by the existing highway system. The scenario development process for this horizon year will place an emphasis on balancing highway capacity with improved transit and travel demand management techniques, including changes to local land use and development policies.

The Transportation Choices 2025 plan can be summarized as placing primary emphasis on maintaining the existing system, improving transit, managing travel demand, and making capacity improvements in a selective manner after study. The plan notes that even with full implementation of all strategies and improvements, congestion will still be worse in 2025 than today, as traffic growth will occur throughout the state. Most of the specific projects mentioned in the plan appear unlikely to have a significant impact on the ACE, in terms of shifting or concentrating traffic.

METROPOLITAN PLANNING ORGANIZATIONS There are currently two metropolitan planning organizations (MPO) that encompass portions of the ACE service area and its entire travel corridor. The South Jersey Transportation Planning Organization (SJTPO) includes Atlantic, Cape May, Cumberland, and Salem Counties. The Delaware Valley Regional Planning Commission (DVRPC) includes nine counties, of which five (Bucks, Chester, Delaware, Montgomery, and Philadelphia) are in Pennsylvania and four (Burlington, Camden, Gloucester, and Mercer) are in New Jersey. WSA has obtained long-range transportation plans from

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these and one other MPOs with a potentially influential jurisdiction: North Jersey Transportation Planning Authority (NJTPA). The specific MPOs and documents are:

ƒ Access and Mobility 2030, completed in September 2005 by the North Jersey Transportation Planning Authority (NJTPA);

ƒ Destination 2030, completed in June 2005 by the Delaware Valley Regional Planning Commission (DVRPC); and

ƒ Regional Transportation Plan, updated in June 2004 by the South Jersey Transportation Planning Organization (SJTPO).

These documents contain, in accordance with federal regulations, financially-constrained programs of transportation improvement projects for the coming 25-year period. In addition to specific improvements, the regional transportation plans also contain discussions of goals and objectives, and transportation issues that require further study. Many of the potential improvements are only conceptual in nature and evolve into more specific projects in the design process. Regional transportation plans are required to be updated at least every three years.

There are two current regional transportation plans that encompass portions of the ACE service area and its entire travel corridor. These regional transportation plans were developed by both the SJTPO and the DVRPC. WSA reviewed the SJTPO Regional Transportation Plan and the New Jersey portion of the Destination 2030 from the DVRPC for potential improvement projects which would impact the ACE service corridor.

A few projects are included in the regional transportation plans that may result in future projects with potential traffic impacts affecting the ACE, in terms of capacity improvements to connecting feeder routes. The project with the greatest effect would be the reconstruction of the NJ42 Freeway, between I- 76/I-295 and the ACE. This project is scheduled from 2011 to 2020, with a cost of $15.0 million. In addition, a $17.0 million new interchange on NJ 42 at College Drive is planned for implementation, roughly 1 mile from the entrance to the ACE. The new interchange would provide additional opportunities for traffic to access the ACE from Cherrywood, Davisville, and Grenloch. Both the freeway reconstruction and the new interchange present opportunities for increased traffic on the ACE.

Two interchange improvements on I-295 also have the potential to impact the ACE. The first is the addition of new ramps and connections at Interchange 26, with NJ 42, which feeds directly into the ACE. This project is planned for implementation in two phases, between 2005 and 2020. The other interchange improvement is slightly north at Interchange 40 on I-295, with NJ 38, which will improve connections of I-295 to local roads. By improving connections this project, which is programmed for implementation by 2010, allows traffic to more easily reach the ACE.

Many of other projects in the regional transportation plans include bridge rehabilitations, intersection improvements, road resurfacing and roadway widening. Some improvements to competing roadways may also impact the ACE. Recent intersection improvements on US 30 will improve travel conditions on a roadway running parallel to the ACE. Road widening on US 322 between 130 and the New Jersey Turnpike, and interchange improvements on NJ 55 and NJ 73 are planned for implementation after

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2011. However, given the proportionally small effect of each project on their respective corridors, the effect of these projects on the ACE may be negligible.

BASIC ASSUMPTIONS

This section describes the basic assumptions used in this study to forecast travel demand and toll revenue for the ACE. Traffic and toll revenue estimates are predicated on the following basic assumptions, all of which are considered reasonable for the purposes of this analysis.

1. There will be no toll increases in the forecast period.

2. No new competing freeway or major arterial facilities, tolled or toll-free, will be constructed during the forecast period;

3. The ACE and its feeder routes will be well maintained, efficiently operated, and effectively signed and promoted in order to encourage maximum usage;

4. Population, employment, and development activity within the influence area of the ACE will be generally in accordance with the projections discussed earlier;

5. No reduced growth initiatives or related controls which would significantly inhibit normal development patterns will be introduced during the forecast period;

6. No national, regional, or local emergency will arise which would abnormally restrict usage of motor vehicles during the forecast period; and

7. Motor fuel will remain in adequate supply during the forecast period and future fuel prices will stabilize.

A key assumption from the list above that should be noted given recent experience is assumption number seven. WSA possesses no realistic way to adequately assess the long-term fuel prices and furthermore forecasting the driving public’s response (in terms of automobile use) to higher gas prices is quite difficult. For those reasons, for this study, it has been assumed that oil and retail gasoline supplies will remain in adequate supply and that prices will remain approximately, at, or below, current fuel prices. These fundamental assumptions form the underpinnings of the travel demand forecasting effort of this study. Any significant departure from these basic assumptions could materially affect the estimated traffic and toll revenue for the ACE.

ESTIMATED ANNUAL TRANSACTIONS AND TOLL REVENUE

As shown in Table 8, total transactions are expected to grow from approximately 69.7 million in 2008 to over 74.8 million by 2010 and exceeding 87.2 million by 2017. Total annual toll revenue estimates are expected to increase from approximately $65.0 million in 2008 to over $69.7 million by 2010. Total toll revenue is expected to reach approximately $81.2 million by 2017. The average annual percent increase

June 27, 2007 Page 18 D-19 Atlantic City Expressway Traffic and Revenue Forecast DRAFT

in toll revenue amounts to 2.5 percent over the 10-year forecast. The toll rates over the forecast period were assumed to remain unchanged.

Total annual revenues collected from concessions are estimated at about $2.0 million in 2008 and are expected to increase to approximately $2.5 million by 2017. Total combined revenues are expected to exceed $67.0 million in 2008 and reach $83.8 million by 2017.

Table 8 Estimated Annual Transactions and Revenue Atlantic City Expressway

Revenue (1) Year Transactions Tolls Concessions Transactions 2008 69,744,300 64,900,000 2,073,000 67,063,000 2009 72,673,600 67,720,000 2,161,000 69,881,000 2010 74,853,800 69,751,000 2,225,000 71,976,000 2011 76,874,900 71,635,000 2,285,000 73,920,000 2012 78,796,800 73,426,000 2,343,000 75,769,000 2013 80,609,100 75,114,000 2,397,000 77,511,000 2014 82,422,800 76,804,000 2,450,000 79,254,000 2015 84,071,300 78,340,000 2,499,000 80,839,000 2016 85,752,700 79,907,000 2,549,000 82,456,000 2017 87,210,500 81,266,000 2,593,000 83,859,000

(1) Includes an annual ground rent payment of $200,000 paid by Sunoco Stations in January. (2) Reflects actual audited transactions and toll revenue through April and un-audited May 2007.

It should be recognized that estimates included in this report are based on best available information at the time of the study. This study did not make use of updated detail motorist travel pattern and trip characteristic information. Current professional practices and procedures were used in the development of these findings. However, there is considerable uncertainty inherent in future traffic and revenue forecasts for any toll facility. There may sometimes be differences between forecasted and actual results caused by events and circumstances beyond the control of the forecasters. These differences could be material. Also, it should be recognized that traffic and revenue forecasts in this document are intended to reflect the overall estimated long-term trend. Actual experience in any given year may vary due to economic conditions and other factors.

Our Project Manager, Matthew D. Chambers, gratefully acknowledges the excellent cooperation and assistance provided by the SJTA staff during this study. We have sincerely appreciated the opportunity to have been a participant in this important study. Respectfully Submitted, WILBUR SMITH ASSOCIATES

Raymond P. Richard Vice President

June 27, 2007 Page 19 D-20 APPENDIX E

FORM OF CONTINUING DISCLOSURE AGREEMENT [THIS PAGE INTENTIONALLY LEFT BLANK] CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the “Disclosure Agreement” or the “Agreement”) is made as of the 12th day of July, 2007 by and between the South Jersey Transportation Authority (the “Authority”), a public body corporate and politic of the State of New Jersey and The Bank of New York, in its capacity as trustee under the Authority's “Second Amended and Restated Resolution Authorizing Revenue Bonds and Other Obligations” adopted by the Authority on April 19, 2005 (the “Bond Resolution”), as amended and supplemented by, inter alia, a 2007 Subordinated Note Resolution adopted by the Authority on June 19, 2007 and further amended and supplemented by a Series Certificate of the Authority dated July 5, 2007 (collectively, the “Resolution”), as Dissemination Agent (the “Dissemination Agent”). This Disclosure Agreement is entered into in connection with the issuance and sale of the Authority's Taxable Subordinated Notes, Series 2007 (the “Notes”).

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered for the benefit of the holders and beneficial owners of the Notes (collectively, the “Noteholders”) and in compliance with S.E.C. Rule 15c2-12(b)(5), as it may be amended from time to time, including administrative or judicial interpretations thereof, as it applies to the Notes.

SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean the Authority's Annual Report provided pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Central Post Office” shall mean, in accordance with the SEC Interpretative Letter dated September 7, 2004 (the “Interpretative Letter”) regarding www.DisclosureUSA.org - Texas MAC’s Central Post Office, DisclosureUSA, an internet based filing system where issuers of tax-exempt bonds and other filers on behalf of such issuers can upload for immediate transmission to the Repositories information and notices required to be filed with Repositories pursuant to continuing disclosure undertakings designed to assist underwriters in complying with the Rule 15c2-12.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.

E-1 “National Repository” shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. As of the date of this Agreement, the following are National Repositories:

Bloomberg Municipal Repository DPC Data, Inc. 100 Business Park Drive One Executive Drive Skillman, New Jersey 08558 Fort Lee, New Jersey 07024 Phone: 609.279.3225 Phone: 201.346.0701 Fax: 609.279.5962 Fax: 201.947.0107 www.bloomberg.com/markets/rates/municontacts.html www.munifilings.com

Interactive Data Pricing and Reference Data, Standard & Poor’s Securities Evaluations, Inc. Inc. 55 Water Street Attn: NRMSIR 45th Floor 100 William Street, 15th Floor New York, New York 10041 New York, New York 10038 Phone: 212.438.4595 Phone: 212.771.6999; 800.689.8466 Fax: 212.438.3975 Fax: 212.771.7390 www.disclosuredirectory.standaryandpoors.com www.interactivedata-prd.com

“Opinion of Counsel” shall mean a written opinion of counsel expert in federal securities law acceptable to the Authority.

“Repository” shall mean each National Repository and each State Repository, if any.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time, including administrative or judicial interpretations thereof, as it applies to the Notes.

“State Repository” shall mean any public or private repository or entity designated by the Authority as a State Repository for the purpose of the Rule. As of the date of this Agreement, there is no State Repository, nor is one expected to be established.

SECTION 3. Provision of Annual Reports.

(a) Commencing with the 2007 fiscal year of the Authority, the Authority shall, not later than May 15 of each year during which any of the Notes remain Outstanding, commencing May 15, 2008, provide to the Trustee the Authority's Annual Report prepared for the fiscal year of the Authority ending the immediately preceding December 31 (or if the fiscal year of the Authority shall end on any date other than December 31, the Authority shall provide its Annual Report to the Trustee not later than the fifteenth day of the fifth month next following the end of such other fiscal year); provided, however, that the audited financial statements of the Authority may be submitted separately from the Authority's Annual Report and later than the date required herein for the filing of the Authority's Annual Report if such audited financial statements are not available by such date, but only

E-2 if the unaudited financial statements are included in such Annual Report. The Annual Report provided to the Trustee by the Authority shall comply with the requirements of Section 4 of this Disclosure Agreement but may be submitted as a single document or as separate documents comprising a package and may cross-reference other information submitted to the Repositories. If the document incorporated by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board.

(b) The Trustee, promptly on receiving the Authority's Annual Report, and, in any event, not later than June 1 in each year (or if the fiscal year of the Authority shall end on any date other than December 31, not later than the first day of the sixth month next following the end of such other fiscal year), shall submit such Annual Report received by it to each Repository.

(c) If the Authority fails to submit its Annual Report to the Trustee by the date required in subsection (a) of this Section 3, the Trustee shall send a notice to the Authority advising of such failure. Whether or not such notice is given or received, if the Authority thereafter fails to submit its Annual Report to the Trustee by the last Business Day of the month in which such Annual Report was due, the Trustee shall promptly send a notice to (i) each National Repository or to the Municipal Securities Rulemaking Board, and (ii) the State Repository, if any, in substantially the form attached as Exhibit A hereto.

(d) Notwithstanding anything to the contrary in this Disclosure Agreement, in order to expedite the transmission of the Annual Report to the Repositories, as set forth in paragraphs (a) through (c) of this Section 3, the Authority shall have the option, but shall not be obligated, to submit its Annual Report directly to the Repositories not later than May 15 in each year (or if the fiscal year of the Authority shall end on any date other than December 31, not later than the fifteenth day of the fifth month next following the end of such other fiscal year). In the event that the Authority elects to submit its Annual Report directly to the Repositories, the Authority shall, at the same time, submit its Annual Report to the Trustee together with evidence that such Annual Report has been forwarded by the Authority to the Repositories, upon which evidence the Trustee may conclusively rely. In the event that the Authority elects not to submit the Annual Report directly to the Repositories, the Authority shall provide the Annual Report to the Trustee within the time period specified in paragraph (a) of this Section 3.

E-3 SECTION 4. Contents of Annual Report.

(a) Annual Report means, (i) updated information pertaining to the finances and operating data of the Authority substantially of the type set forth in the sections captioned as follows in the Official Statement of the Authority circulated in connection with the issuance of the Notes: “ATLANTIC CITY EXPRESSWAY - Tables 1, 2 and 3,” consisting of monthly toll paying vehicles, two way at the Egg Harbor and Pleasantville Barriers and percentage change from prior year (Table 1), toll schedule by location and classification (Table 2), and annual toll traffic and revenues (Table 3), “AIRPORT PROJECT - Table 4”, consisting of annual air passengers for scheduled and chartered service, and “HISTORICAL OPERATING RESULTS - Table 5”, consisting of annual operating results for the Authority, and (ii) “REPORT OF AUDIT” being the audit report prepared annually by the Authority’s independent auditors with respect to the Authority's general purpose financial statements for each year, in substantially the form appearing in Appendix A to such Official Statement, all such financial information included in (i) and (ii) above being prepared using the accounting standards set forth in subsection (b) of this Section 4.

(b) The accounting policies of the Authority conform to generally accepted accounting principles.

SECTION 5. Central Post Office. Notwithstanding anything herein contained to the contrary, the Treasurer may file, or cause to be filed, with the Central Post Office, the Treasurer’s Annual Report, and any notices necessary to be filed hereunder in lieu of making such filings with the Repositories for so long as the filing of an Annual Report and notices with the Central Post Office is an undertaking described in paragraph (b)(5)(i) of the Rule, as determined by the SEC in the Interpretative Letter. The Trustee may assume that the Interpretative Letter is in full force and effect unless (i) advised by the Treasurer in writing to the contrary or (ii) the Trustee has actual knowledge that the Interpretative Letter has been withdrawn or revoked

SECTION 6. Reporting of Significant Events.

(a) This Section 6 shall govern the giving of notices of the occurrence of any of the following listed events, if material (the “Listed Events”):

(1) Principal and interest payment delinquencies;

(2) Non-payment related defaults;

(3) Unscheduled draws on debt service reserves reflecting financial difficulties;

(4) Unscheduled draws on credit enhancements reflecting financial difficulties;

(5) Substitution of credit or liquidity providers, or their failure to perform;

E-4 (6) Reserved;

(7) Modification to rights of Noteholders;

(8) Note calls, other than mandatory, scheduled sinking fund redemptions, not otherwise contingent upon the occurrence of an event, the terms of which are set forth in the final Official Statement of the Authority circulated in connection with the issuance of the Notes and notice of which is provided to the Owners of the Notes pursuant to the Resolution;

(9) Defeasances;

(10) Release, substitution, or sale of property securing repayment of the Notes; and

(11) Rating changes.

(b) The Authority shall, on a timely basis after the occurrence of any of the Listed Events which are material (except events listed in clauses (a)(8) or (9) which shall be deemed hereby to be material), notify the Trustee in writing to report the event pursuant to subsection (c).

(c) If the Trustee has been instructed by the Authority to report the occurrence of a Listed Event, such Trustee shall file a notice of such occurrence with each Repository or with the Municipal Securities Rulemaking Board, as specified by the Authority in written instructions to the Trustee, and to the State Repository, if any, within five (5) Business Days of the receipt of such instruction. In addition, notice of Listed Events described in subsections (a)(8) and (9) shall be given by such Trustee under this subsection simultaneously with the giving of the notice of the underlying event to Holders of affected Notes pursuant to the Resolution.

(d) Notwithstanding anything to the contrary in this Disclosure Agreement, in order to expedite the transmission of the occurrence of Listed Events as set forth in this Section 6, the Authority shall have the option, but shall not be obligated to, submit timely notice directly to each National Repository or with the Municipal Securities Rulemaking Board and any State Repository, with a copy to the Trustee.

SECTION 7. Termination of Reporting Obligation. The obligations of the Authority under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Notes.

SECTION 8. Amendment; Waiver. Notwithstanding any other provisions of this Disclosure Agreement, the Authority may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, if such amendment or waiver is supported by an Opinion of Counsel addressed to the Authority and the Trustee to the

E-5 effect that such amendment or waiver will not, in and of itself, cause the undertakings herein to violate the Rule. No amendment to this Disclosure Agreement shall change or modify the rights or obligations of the Trustee without its written assent thereto.

SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Authority from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Authority chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Authority shall not have any obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. (a) In the event of a failure of the Authority to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the written request of the Holders of at least 25% in aggregate principal amount of Outstanding Notes affected by such failure shall), or any Noteholder may take such actions as may be necessary and appropriate to cause the Authority to comply with its obligations under this Disclosure Agreement. Notwithstanding the foregoing, the right of any Noteholder to challenge the adequacy of information provided pursuant to this Agreement shall be limited in the same manner as enforcement rights are limited under Section 8.05 of the Bond Resolution. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Agreement in the event of any failure of the Authority to comply with this Disclosure Agreement shall be an action to compel performance.

(b) For purposes of this Disclosure Agreement, in making determinations under applicable securities law, the Authority may, but shall not be required to, rely on an Opinion of Counsel with respect to matters of a legal nature.

SECTION 11. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Trustee and the Noteholders, and each Noteholder is hereby declared to be a third party beneficiary of this Disclosure Agreement. Except as provided in the immediately preceding sentence, this Disclosure Agreement shall create no rights in any other person or entity.

SECTION 12. Indemnification of the Trustee. The provisions of Section 9.06 of the Bond Resolution relating to indemnification of the Trustee shall apply to the performance by the Trustee of its obligations under this Disclosure Agreement, and those provisions shall survive the termination of this Disclosure Agreement, the payment of the Notes and the resignation or removal of the Trustee. The Trustee shall have no responsibility for the form or content of any material prepared by the Authority and filed hereunder.

E-6 SECTION 13. Filing with Certain Dissemination Agents. The Authority may satisfy its obligations hereunder to file any notice, document or information with a National Repository or State Repository by filing the same with any dissemination agent, including any “central post office” or similar entity, assuming or charged with responsibility for accepting notices, documents or information for transmission to such National Repository or State Repository, to the extent permitted or required by the Securities and Exchange Commission (the “SEC”). For this purpose, permission shall be deemed to have been granted by the SEC if and to the extent the agent has received a “no-action” letter, which has not been revoked, from the SEC to the effect that enforcement action would not be recommended on account of using the agent, and not such National Repository or State Repository, as the source of information in determining compliance with the Rule.

SECTION 14. Notices. All notices and other communications required or permitted under this Disclosure Agreement shall be in writing, and shall be deemed to have been duly given when received, and shall be delivered (personally, by recognized national or regional courier service, or by other messenger, for delivery to the intended addressee) or sent by United States mail, registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below:

(i) If to the Authority:

South Jersey Transportation Authority Hand delivery only: Administration Building Milepost 21.3, Farley Service Plaza Atlantic City Expressway Elwood, New Jersey 08217

Mail: P.O. Box 351 Hammonton, New Jersey 08037 Attn: Director of Finance Tel: (609) 965-6060 Fax: (609) 965-7597

E-7 (ii) If to the Trustee:

The Bank of New York 385 Rifle Camp Road West Paterson, New Jersey 07424 Attn: Corporate Trust Tel: (973) 357-7812 Fax: (973) 357-7840

Any party may alter the address to which communications are to be sent by giving notice of such change of address in conformity with the provisions of this Section 14 for the giving of notice.

SECTION 15. Successors and Assigns. All of the covenants, promises and agreements contained in this Disclosure Agreement by or on behalf of the Authority or by or on behalf of the Trustee shall bind and inure to the benefit of their respective successors and assigns, whether so expressed or not.

SECTION 16. Headings for Convenience Only. The descriptive headings in this Disclosure Agreement are inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof.

SECTION 17. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

SECTION 18. Severability. If any provision of this Disclosure Agreement, or the application of any such provision in any jurisdiction or to any person or circumstance, shall be held invalid or unenforceable, the remaining provisions of this Disclosure Agreement, or the application of such provision as is held invalid or unenforceable in jurisdictions or to persons or circumstances other than those in or as to which it is held invalid or unenforceable, shall not be affected thereby.

SECTION 19. Governing Law. This Disclosure Agreement shall be governed by and construed in accordance with the laws of New Jersey.

E-8 SOUTH JERSEY TRANSPORTATION AUTHORITY

By: Bart R. Mueller Executive Director

THE BANK OF NEW YORK Trustee

By: Linda Corbo Assistant Treasurer

[SIGNATURE PAGE TO CONTINUING DISCLOSURE AGREEMENT]

E-9 EXHIBIT A

NOTICE OF FAILURE TO FILE AN ANNUAL REPORT

Name of Authority: South Jersey Transportation Authority

Name of Bond issue affected: $______Taxable Subordinated Notes, Series 2007

Date of Issuance of the affected Bond issue: July 12, 2007

NOTICE IS HEREBY GIVEN that the South Jersey Transportation Authority has not provided an Annual Report with respect to the above named Note issue as required by Section 3 of the Continuing Disclosure Agreement dated July 12, 2007, by and between the Authority and the Trustee. [TO BE INCLUDED ONLY IF THE TRUSTEE HAS BEEN ADVISED OF THE EXPECTED FILING DATE - The Authority anticipates that the specified Annual Report will be filed by .]

Dated:

THE BANK OF NEW YORK cc: South Jersey Transportation Authority

E-10 APPENDIX F

FORM OF BOND COUNSEL OPINION [THIS PAGE INTENTIONALLY LEFT BLANK] [Upon initial issuance of the Notes, Cozen O’Connor, Bond Counsel to the Authority, is expected to render its Approving Opinion of Bond Counsel in substantially the following form]

[Closing Date]

South Jersey Transportation Authority Farley Service Plaza Milepost 21.3 Elwood, New Jersey 08217

Re: South Jersey Transportation Authority $ Taxable Subordinated Notes, Series 2007

Ladies and Gentlemen:

We have served as Bond Counsel to the South Jersey Transportation Authority (the “Authority”), a public body corporate and politic under the laws of the State of New Jersey (the “State”), created pursuant to the South Jersey Transportation Authority Act, constituting Chapter 252 of the New Jersey Laws of 1991, as amended (the “Act”), in connection with the issuance by the Authority of its $______aggregate principal amount of Taxable Subordinated Notes, Series 2007 (the “Notes”). The Notes are being issued under and pursuant to the Act, the Second Amended and Restated Resolution Authorizing Revenue Bonds and Other Obligations adopted by the Authority on April 19, 2005, which amended and restated in its entirety the Amended and Restated Resolution Authorizing Revenue Bonds and Other Obligations adopted by the Authority on May 18, 1999, which amended and restated in its entirety the Resolution Authorizing Revenue Bonds and Other Obligations adopted by the Authority on December 3, 1992 (the “Bond Resolution”), as amended and supplemented, including by the 2007 Subordinated Note Resolution adopted on June 19, 2007 (the “2007 Note Resolution”) and a Series Certificate dated July 5, 2007 (the “Series Certificate,” and together with the Bond Resolution and the 2007 Note Resolution, the “Resolution”).

The Notes will bear interest at a fixed rate, mature and be subject to optional redemption as set forth in the Authority’s Official Statement dated July _, 2007, relating to the Notes (the “Official Statement”). The Notes will be issued only as fully registered notes in denominations of $5,000 and integral multiples of $5,000 in excess thereof.

The Notes are being issued to finance a project (collectively, the “Project”) consisting of: (i) the design of (a) a westbound third lane widening on the Atlantic City Express; and (b) an Express EZ- Pass at the Egg Harbor Toll Plaza on the Atlantic City Expressway; (ii) the construction of a full interchange at the intersection of the Atlantic City Expressway and NJ State Route 50; (iii) to fund other capital improvements as shall be included in the Authority’s capital plan for 2007-2011; (iv) the payment of capitalized interest on a portion of the Notes; and (v) the payment of certain costs of issuing the Notes.

We have examined the proceedings relating to the authorization and issuance of the Notes, including, among other things: (a) the Act; (b) copies of the Bond Resolution and the 2007 Note Resolution; (c) executed counterparts of the Series Certificate; (d) certificates executed by the Authority and the Trustee as to the execution and authentication of the Notes; and (e) various other certificates executed by the Authority. In rendering our opinion, we have not undertaken to verify the factual matters set forth in such opinion, agreements, certificates and other documents by independent investigation and

F-1 South Jersey Transportation Authority [Closing Date] Page 2 ______have relied on the covenants, warranties and representations made by the Authority in such certificates and in the Resolution and other financing documents.

Based on the foregoing and as set forth below, we are of the opinion that:

1. The Authority is a public body, corporate and politic, constituting an instrumentality of the State, is duly created and validly existing under the Act, and has full power and authority under the Act to adopt the Bond Resolution and the 2007 Note Resolution and to execute the Series Certificate, to perform its obligations thereunder, and to issue and sell the Notes.

2. The Bond Resolution and the 2007 Note Resolution have been duly adopted by the Authority and the Series Certificate has been executed by the Authority, each are in full force and effect and constitute the legal, valid and binding obligations of the Authority enforceable in accordance with their respective terms, except as such enforcement may be limited by laws relating to bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws affecting creditors' rights generally and subject to limitations on legal remedies against public entities in the State, to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and to the exercise of judicial discretion in appropriate cases.

3. The 2007 Note Resolution creates the valid pledge which it purports to create of the moneys and securities from time to time held in the Subordinated Debt Fund and the General Reserve Fund, subject and subordinate to the pledge thereof under the Bond Resolution and subject to the provisions of the Bond Resolution directing and permitting the application thereof pursuant to Section 5.12(a) of the Bond Resolution and on the terms and conditions set forth in the Bond Resolution.

4. The Notes have been duly and validly authorized, executed, issued and delivered by the Authority in accordance with the Constitution and the statutes of the State, including the Act, and the Resolution and are entitled to the benefit and security of the Act and the Resolution. The Notes constitute Subordinated Indebtedness and are legal, valid and binding, special, limited obligations of the Authority enforceable in accordance with their terms, except as such enforcement may be limited by laws relating to bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws affecting creditors' rights generally and subject to limitations on legal remedies against public entities in the State, to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and to the exercise of judicial discretion in appropriate cases.

5. Under existing laws of the State, interest on the Notes and any gain on the sale thereof is not includible in gross income under the New Jersey Gross Income Tax Act.

6. Interest on the Notes is includible in the gross income of the holder thereof for purposes of federal income taxation under existing statutes, regulations, rulings and court decisions.

We express no opinion herein on the adequacy, completeness or accuracy of the Official Statement or any other disclosure document pertaining to the offering of the Notes.

We call to your attention that the Notes are special, limited obligations of the Authority payable solely from and secured solely by the property pledged under the 2007 Note Resolution and from any other amounts available under the Resolution for the payment of the Notes. The Notes do not now and shall never constitute a charge against the general credit of the Authority. The Authority has no taxing power. The Notes do not constitute a debt or liability of the State or any political subdivision thereof (other than the Authority to the limited extent set forth in the 2007 Note Resolution), either legal, moral or otherwise, or constitute a pledge of the faith and credit or taxing power of the State, and nothing

F-2 South Jersey Transportation Authority [Closing Date] Page 3 ______in the Act shall be construed to authorize the Authority to incur any indebtedness on behalf of or in any way obligate the State or any other political subdivision thereof.

This opinion is expressed as of the date hereof. We do not assume any obligation to update or supplement this opinion to reflect, or otherwise advise you of, any facts or circumstances which may hereafter come to our attention or any changes in facts, circumstances or law which may hereafter occur.

Very truly yours,

F-3 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX G

SPECIMEN MUNICIPAL BOND INSURANCE POLICY [THIS PAGE INTENTIONALLY LEFT BLANK] FINANCIAL MUNICIPAL BOND SECURITY INSURANCE POLICY ASSURANCE®

ISSUER: Policy No.: -N

BONDS: Effective Date: Premium: $

FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of Financial Security, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.

On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which Financial Security shall have received Notice of Nonpayment, Financial Security will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by Financial Security, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in Financial Security. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by Financial Security is incomplete, it shall be deemed not to have been received by Financial Security for purposes of the preceding sentence and Financial Security shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, Financial Security shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by Financial Security hereunder. Payment by Financial Security to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of Financial Security under this Policy.

Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless Financial Security shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment

G-1 Page 2 of 2 Policy No. -N

made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to Financial Security which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.

Financial Security may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to Financial Security pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to Financial Security and shall not be deemed received until received by both and (b) all payments required to be made by Financial Security under this Policy may be made directly by Financial Security or by the Insurer's Fiscal Agent on behalf of Financial Security. The Insurer's Fiscal Agent is the agent of Financial Security only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of Financial Security to deposit or cause to be deposited sufficient funds to make payments due under this Policy.

To the fullest extent permitted by applicable law, Financial Security agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to Financial Security to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy.

This Policy sets forth in full the undertaking of Financial Security, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.

In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this Policy to be executed on its behalf by its Authorized Officer.

[Countersignature] FINANCIAL SECURITY ASSURANCE INC.

By By Authorized Officer

A subsidiary of Financial Security Assurance Holdings Ltd. (212) 826-0100 31 West 52nd Street, New York, N.Y. 10019

Form 500NY (5/90)

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SOUTH JERSEY TRANSPORTATION AUTHORITY • Taxable Subordinated Notes, Series 2007 Printed on Recycled Paper IMAGEMASTER 800.452.5152