Country Herbed Meatloaf

I got this in an old issue of Country Magazine years ago but it's still a hit today!

Country Herbed Meatloaf

Herb Sauce
1/4 cup olive oil
8 oz. fresh mushrooms, chopped
1 large onion, finely chopped
1 garlic clove, minced
1 28 oz. can crushed tomatoes
1 6 oz. can tomato paste
1 tsp. salt
1/8 tsp. pepper
2 tsp. sugar
1 cup water
1 bay leaf
1 Tbsp. chopped fresh basil or 2 tsp. dried basil

Meatloaf
2 lbs. ground beef or meatloaf mix
1 cup seasoned dry breadcrumbs
3 Tbsp. milk
2 eggs, beaten

In a skillet, heat oil on high.  Saute the mushrooms, onion and garlic.  Add tomatoes, tomato paste, salt pepper and sugar.  Remove 1 1/2 cups of sauce, set aside.  To the remaining sauce in the pan, add the water, bay leaf and basil.  Simmer, uncovered, for 45 minutes, stirring occasionally.

Meanwhile, combine all of the meatloaf ingredients with the 1 1/2 cups reserved sauce.  Press into a 9x5x3" loaf.  Bake at 350 degrees for 45 minutes.  Remove from oven, drain.  Spread 1/2 cup of the herb sauce over the top of the meatloaf and return to the oven for 15 minutes.

Serve the meatloaf with the remaining herb sauce.